PROBLEMS  OF  RECONSTRUCTION 


THE  MACMILLAN  COMPANY 

NEW  YORK    ■    BOSTON   •    CHICAGO   ■    DALLAS^ 
ATLANTA   ■    SAN    FRANCISCO 

MACMILLAN  &  CO.,  Limited 

LONDON  •    BOMBAY   •    CALCUTTA 
MELBOURNE 

THE  MACMILLAN  CO.  OF  CANADA,  Ltd. 

TORONTO 


PROBLEMS 


OF 


RECONSTRUCTION 


BY 


ISAAC  LIPPINCOTT,  Ph.D. 

ASSOCIATE   PROFESSOR   OF   ECONOMICS 
WASHINGTON   UNIVEBSITT 


THE  MACMILLAN  COMPANY 

1920 

All  righlt  reserved 


COPTEIGHT,  1919, 

Bt  the  macmillan  company. 


Set  up  and  electrotyped.     Published  April,  1919. 


J.  S.  Gushing  Co.  —  Berwick  &  Smith  Oo. 
Norwood,  Mass.,  U.S.A. 


1  oCd.3 

U  L  4  ■ 


CONTENTS 

OHAPTEB 

I.  The  Need  of  Reconstruction  . 

II.  Was  Control.     (Food  Products) 

III.  War  Control.     (Fuel  Administration) 

IV.  War  Labor  Control    .... 
V.  Other  Elements  of  Control     . 

VI.    War  Control  in  Foreign  Countries 
Vn.    Economic  Results  of  the  War 
Vin.    Reconstruction  in  Foreign  Countries 


PAOB 

1 

30 
72 
103 
138 
179 
213 
268 


IX.    A  Reconstruction  Plan  for  the  United  States    299 


/w>w 


20180 


PROBLEMS  OF  RECONSTRUCTION 

CHAPTER  I 
THE  NEED  OF  RECONSTRUCTION 

From  an  industrial  point  of  view  the  nations  at 
war  are  confronted  with  two  groups  of  problems. 
Stated  briefly,  the  first  group  contains  questions 
of  concentrating  industrial  effort  largely  on  war 
production,  of  diverting  men,  materials,  and  finan- 
cial resources  to  the  essential  industries  and  of  cur- 
tailing the  operations  of  all  the  rest,  of  regulating 
commerce  with  foreign  countries,  and  of  formulat- 
ing policies  and  methods  for  the  accomplishment 
of  these  ends.  In  short,  this  is  principally  a  ques- 
tion of  development  of  war  control  with  all  this 
implies.  The  second  group  of  problems  arises 
out  of  the  first.  It  involves  such  questions  as  the 
dissolution  of  the  war  organization,  the  removal 
of  the  machinery  of  control,  the  restoration  of 
men,  funds,  and  materials  to  the  industries  which 
serve  the  uses  of  peace,  and  the  reestablishment 
of  normal  commercial  relations  with  the  outside 
world.  The  latter  are  post-war  problems.  Their 
prompt  solution  is  necessary  because  the  war  has 
turned  industrial  and  social  life  into  new  channels, 

B  1 


2  PROBLEMS  OF  RECONSTRUCTION 

and  because  it  will  be  necessary  for  us  to  restore 
the  normal  order  as  quickly  as  possible.  These 
brief  statements  outline  the  task  of  this  volume. 
Our  purpose  is  first  to  study  the  growth  of  war 
control  and  indicate  its  results,  and  second  to 
present  some  of  the  leading  problems  of  recon- 
struction. 

To  a  considerable  extent,  neutral  countries,  also, 
are  confronted  with  questions  of  war  control  and 
reconstruction.  War  measures  have  been  enforced 
on  many  of  them  partly  as  a  means  of  carrying 
out  their  agreements  with  belligerent  countries 
regarding  the  distribution  of  imported  commodi- 
ties. To  some  extent,  control  has  been  made 
necessary  by  the  disturbance  of  their  industries 
due  to  other  results  of  the  war.  The  requisition- 
ing of  much  of  the  world's  shipping  deprived  all 
countries  of  facilities  for  sending  commodities 
to  market  and  of  obtaining  raw  and  finished  prod- 
ucts in  return.  This  has  of  necessity  disturbed 
their  industrial  and  commercial  life.^  Even  the 
control  of  foodstuffs  and  fuel  has  been  made  neces- 
sary in  many  neutral  countries  owing  to  the  limited 
supplies,  and  in  some  instances  investments  are 
controlled  and  commerce  regulated  in  a  manner 
which  suggests  the  methods  of  the  belligerents. ^ 
Other  tendencies  may  be  noted.  The  world  over, 
the  war  has  afforded  a  stimulus  to  some  industries, 

—  notably  to  those  which  supply  urgent  war  needs, 

—  and   has   occasioned   the   depression    of   others. 

1  Cf.  Chap.  6.  2  cf.  Chap.  6. 


THE  NEED  OF  RECONSTRUCTION  3 

In  one  case  there  has  been  an  abnormal  develop- 
ment, in  the  other  an  unusual  depression.  De- 
prived of  raw  materials  from  customary  sources, 
some  countries  have  set  to  work  to  exploit  local 
supplies  which  could  not  be  profitably  developed 
under  normal  conditions  of  trade. ^  Likewise,  manu- 
factures have  arisen  in  many  countries  to  supply 
home  markets,  where,  under  ordinary  circumstances, 
the  most  profitable  course  would  be  to  obtain  the 
commodities  from  abroad. ^  The  war  has  affected 
the  non-participants  in  another  way.  In  several 
notable  instances  it  has  afforded  a  great  stimulus 
to  industries  generally.  This  was  the  course  of 
events  in  the  United  States  before  its  entry  into 
the  war,  and  it  is  at  present  the  case  of  Japan, 
where  industries  are  undergoing  rapid  expansion, 
and  where  the  exploitation  of  foreign  markets  is 
meeting  with  unusual  success.'  In  short,  the  in- 
fluences of  the  war  have  set  industry  everywhere 
off  on  a  tangent. 

These  new  adjustments  are,  to  a  large  extent, 
temporary.  But  it  is  possible  that  the  upheaval 
may  usher  in  a  new  period  of  control  and  protection 
to  defend  the  countries  against  disturbances  which 
are  in  prospect  with  the  return  of  the  old  competi- 
tive conditions.  At  any  event,  a  reconstruction 
problem  will  arise  for  all  the  nations.  This  brief 
explanation  is  perhaps  sufficient  to  make  clear  the 
fact  that  neither  war  control  nor  reconstruction 
is   a   matter   for   the   belligerents   only.     Post-war 

1  Cf.  Chap.  7.  »  Cf.  Chap.  7.  »  Cf.  Chap.  7. 


4  PROBLEMS  OF  RECONSTRUCTION 

conditions  will  require  readjustments  in  many 
countries  just  as  at  the  present  time  some  measure 
of  regulation  is  necessary. 

In  the  United  States  the  institution  of  a  war 
organization  has  produced  a  number  of  epoch- 
making  changes.  On  the  side  of  control,  such 
bodies  have  been  brought  into  existence  as  the 
Council  of  National  Defense,  the  War  Industries 
Board,  the  War  Trade  Board,  the  Food,  Fuel,  and 
Railroad  Administration,  the  War  Labor  Board,  and 
the  Labor  Policies  Board. ^  A  new  group  of  or- 
ganizations has  thus  been  superimposed  on  the 
peace  establishment.  The  effect  of  this  control 
ramifies  into  every  department  of  industry.  We 
are  in  the  midst  of  a  new  industrial  order  in  which 
industrial  managers  no  longer  possess  full  freedom 
to  establish  their  policies,  and  in  which  goods  no 
longer  flow  to  consumers  in  their  customary  vol- 
ume, nor  at  all  times  through '  their  ordinary 
channels.  Industry  is  firmly  controlled  and  is 
made  to  accomplish  certain  purposes  prescribed  by 
the  laws  'and  designated  by  the  administrative 
boards. 

What  we  have  just  said  refers  principally  to  the 
war  organization.  The  operation  of  this  war  ma- 
chine produces  important  effects  on  industry.  The 
stream  of  raw  materials  which,  in  normal  times, 
flows  to  the  peace  industries,  receives  a  new  direc- 
tion. Now  it  moves  in  large  volume  to  the  indus- 
tries which  contribute  to  the  war,  and  in  a  smaller 

»  Cf.  Chaps.  2,  3.  4. 


THE  NEED  OF  RECONSTRUCTION  5 

and  carefully  regulated  stream  to  those  which  ad- 
minister to  the  less  important  uses.  This  is  true  of 
our  great  raw  materials  such  as  iron,  copper,  lead, 
zinc,  coal,  wool,  cotton,  leather,  and  rubber.  Like- 
wise, the  loan  funds,  which,  under  normal  conditions, 
are  supplied  to  the  peace  industries  for  extensions, 
repairs,  and  new  construction,  are  now  divided  into 
three  parts  :  the  first  and  most  important  part  is 
supplied  to  the  Government  with  which  it  meets 
its  many  obligations ;  a  second  part  is  directed  to 
the  war  industries ;  and  a  third  to  the  less  impor- 
tant activities.  A  similar  division  is  made  of  the 
available  supply  of  labor.  The  significance  of  this 
process  is  that  it  builds  up,  under  direction,  a 
group  of  industries  which  are  now  of  the  greatest 
national  importance,  and  at  the  same  time  puts  an 
effective  check  upon  the  others  which,  if  uncon- 
trolled, might  compete  with  vitally  important  en- 
terprises for  the  elements  of  production. 

Will  the  new  organization  be  continued  into  the 
post-war  period?  Has  industrial  society  gone  over 
permanently  to  the  new  order?  With  reference  to 
the  United  States,  there  is  abundant  evidence  to 
show  that  the  war  organization  is  regarded  as 
temporary.  In  most  of  the  war  laws  a  definite 
limit  is  set  for  their  termination.  In  the  case  of 
the  Food  Control  Act  this  is  the  end  of  the  war  when 
*'the  fact  and  date  of  such  termination  shall  be 
ascertained  and  proclaimed  by  the  President."  ^ 
The  control  over  exports  as  conferred  by  Title  VII 

1  Cf.  Public  No.  41,  65th  Congress  (H.  R.  4961),  p.  9. 


6  PROBLEMS  OF  RECONSTRUCTION 

of  the  Espionage  Act  is  limited  to  the  war  period,^ 
and  a  similar  provision  is  made  in  section  11  of  the 
Trading  with  the  Enemy  Act  for  the  termination 
of  import  control.^  The  Railway  Control  Act  and 
the  War  Finance  Corporation  Act  also  contain 
definite  limits  for  their  effectiveness.^  Moreover, 
President  Wilson  has  assured  the  country  in  a 
number  of  his  proclamations  that  the  laws  were 
designated  to  meet  manifest  emergencies  and  that 
he  hoped  the  operation  of  the  acts  would  disturb 
the  normal  course  of  industry  as  little  as  possible. 

Thus,  in  explaining  the  powers  asked  of  Con- 
gress to  deal  with  the  food  question  the  President 
said  in  May  1917 :  "It  is  proposed  to  draw  a  sharp 
line  of  distinction  between  the  normal  activities  of 
the  Government  represented  in  the  Department  of 
Agriculture  in  reference  to  food  production,  con- 
servation, and  marketing  on  the  one  hand,  and  the 
emergency  activities  necessitated  by  the  war  in 
reference  to  the  regulation  of  food  distribution  and 
consumption  on  the  other.  .  .  .  The  proposed 
food  administration  is  intended,  of  course,  only  to 
meet  a  manifest  emergency  and  to  continue  only 
while  the  emergency  lasts.  Since  it  will  be  com- 
posed for  the  most  part  of  volunteers,  there  need  be 
no  fear  of  the  possibility  of  a  permanent  bureaucracy 
arising  out  of  it.     All  control  of  consumption  will 

»  Cf.  Public  No.  f24,  65th  Congress  (H.  R.  291),  p.  9. 
»  Cf.  Public  No.  91,  65th  Congress  (H.  R.  4960),  p.^  14. 
» Cf.  Public  No.  107,  65th  Congress  (S.  3752),  p.  8;  Public  No.  121, 
65th  Congress  (S.  3714),  p.  10. 


THE  NEED  OF  RECONSTRUCTION  7 

disappear  when  the  emergency  has  passed.  It  is 
with  that  object  in  view  that  the  administration 
considers  it  to  be  of  preeminent  importance  that  the 
existing  associations  of  producers  and  distributors 
of  foodstuffs  should  be  mobilized  and  made  use  of 
on  a  voluntary  basis.  .  .  .  The  last  thing  that  any 
American  could  contemplate  with  equanimity  would 
be  the  introduction  of  anything  resembling  Prussian 
autocracy  into  the  food  control  in  this  country."  * 

About  June  26,  1917,  in  explaining  the  policy  of 
export  control,  the  President  said  :  "It  is  important 
that  the  country  should  understand  just  what  is 
intended  in  the  control  of  exports  which  is  about 
to  be  undertaken.  .  .  .  There  will,  of  course,  be 
no  prohibition  of  exports.  The  normal  course  of 
trade  will  be  interfered  with  as  little  as  possible, 
and  so  far  as  possible,  only  its  normal  course 
directed.  .  .  .  This  policy  will  be  carried  out,  not 
by  prohibitive  regulations,  therefore,  but  by  a  sys- 
tem of  licensing  exports  which  will  be  as  simply 
organized  and  administered  as  possible,  so  as  to 
constitute  no  impediment  to  the  normal  flow  of 
commerce."  ^  Of  the  same  tenor  was  the  Pres- 
ident's proclamation  of  August  27,  1917,  which 
greatly  extended  export  control,  and  a  similar  thought 
is  contained  in  the  proclamation  of  February  14, 
1918,  which  put  the  entire  foreign  commerce  of 
the  United  States  under  license.^ 

» Official  U.  S.  Bulletin,  May  21,  1917.  p.  4,  henceforth  referred  to 
asO.  B.  2  0.  B.,  June  26,  1917,  p.  1. 

»  0.  B.,  Aug.  28,  1917,  p.  1 ;   Nov.  29,  1917 ;   Feb.  15,  1918,  p.  1. 


8  PROBLEMS  OF  RECONSTRUCTION 

From  these  statements  it  is  clear  that  the  in- 
tention is  to  dissolve  the  war  organization  as 
promptly  as  possible  after  the  conclusion  of  peace. 
But  many  diflBculties  will  be  encountered.  Emer- 
gency measures  have  cut  new  channels  in  industrial 
and  social  life.  New  relations  have  been  created 
between  Government  and  industry,  between  pro- 
ducers and  consumers,  and  between  employers  and 
laborers.^  The  reasoning  of  both  practical  men 
and  theorists  is  now  based  on  new  premises  ob- 
tained from  the  war  experience.  In  many  in- 
stances, war  measures  have  created  a  new  class  of 
vested  interests,  including  capitalists  who  have 
founded  industries  under  the  expectation  that  the 
Government  will  continue  to  give  aid  and  pro- 
tection, including,  also,  groups  of  people  to  whom 
control  brings  an  advantage,  and  other  groups  who 
are  afraid  that  unregulated  readjustments  to  peace 
conditions  will  bring  disaster  to  business,  and  in- 
cluding, finally,  thousands  of  Government  employees 
who  will  lose  their  positions  when  the  war  organiza- 
tion is  dissolved.  Besides,  if  war  control  meets  with 
a  measure  of  success,  an  argument  will  be  provided 
for  its  continuance.  Control  has  greatly  strength- 
ened the  position  of  those  who  formerly  urged  such 
a  step  and  who  now  find  it  actually  in  practice. 
When  the  time  comes,  therefore,  to  reconstruct 
industrial  society,  the  burden  of  proof  will  rest 
upon  those  who  wish  to  make  the  change. 

Illustrations   of   some   of   these   arguments   may 

1  Cf .  Chaps.  2,  4,  6. 


THE  NEED  OF  RECONSTRUCTION  0 

be  obtained  from  our  own  Civil  War  experience. 
The  issues  of  greenbacks  were  emergency  measures. 
It  was  expected  that  these  notes  would  be  redeemed 
after  the  war.  But  their  issue  created  a  new  indus- 
trial condition ;  as  a  result,  a  considerable  portion 
of  our  population  found  it  to  their  interest  to  seek 
to  prevent  their  redemption.  After  much  contro- 
versy, the  notes  became  a  permanent  part  of  our 
currency  system  in  accordance  with  certain  provi- 
sions of  the  acts  of  June  20,  1874,  and  January  14, 
1875. 

Another  illustration  may  be  taken  from  our 
tariff  history.  After  our  experience  with  protec- 
tive tariffs  from  1816  to  1833,  the  trend  from  the 
latter  date,  —  with  the  exception  of  the  act  of  1842, 
—  was  towards  a  lower  level  of  duties.  The  Civil 
War  legislation  changed  this  course  of  our  history. 
Higher  and  higher  rates  were  imposed  to  protect 
domestic  industries  burdened  with  heavy  internal 
taxes  until,  in  1865,  we  had  reached  a  high  general 
level  of  duties.  The  war  acts  were  emergency 
measures.  But  again,  new  industrial  conditions 
were  created,  vested  interests  appeared,  with  the 
result  that  revision  of  the  tariff  proved  a  most  dif- 
ficult matter.  Indeed,  after  several  decades,  a 
high  tariff  came  to  be  regarded  as  the  established 
policy  of  the  country. 

Already,  there  are  some  suggestions  that  the 
measures  of  the  present  war  may  be  continued  into 
the  peace  period.  Discussing  the  world's  food  situ- 
ation in  October  1917,  Mr.  Hoover  is  reported  to 


10         PROBLEMS  OF  RECONSTRUCTION 

have  said  that  "there  are  two  aspects  from  which 
we  can  consider  this  problem.  The  first  is  the  as- 
pect of  our  immediate  necessities  as  a  war  measure, 
and  the  second,  the  broader  aspect  of  the  world 
need  after  peace ;  for  conditions  growing  out  of  the 
war  disturbance  to  production  will  have  the  most 
material  effect  on  the  whole  agriculture  of  the 
world  for  many  years  subsequent  to  peace."  We 
have  pointed  out  in  another  place  that  many  of 
Mr.  Hoover's  arguments  used  in  favor  of  war  con- 
trol of  foodstuffs  will  probably  be  valid  for  the 
reconstruction  period.^ 

In  European  countries,  where  statesmen  have  had 
a  longer  period  to  study  these  matters,  definite  pro- 
posals have  been  made  to  extend  some  of  the  war 
laws  into  the  future.  It  is  the  opinion  of  many 
members  of  the  British  Labor  Party  that  the  con- 
trol over  importation  of  certain  important  raw 
materials,  inaugurated  as  a  war  policy,  should  be 
made  a  permanent  part  of  the  English  industrial 
system.*  But  demands  for  the  continuation  of 
some  features  of  the  new  order  come  from  another 
source.  Referring  to  supervision  over  imports  and 
exports.  Sir  Albert  Stanley,  president  of  the  Board 
of  Trade,  said:  "The  Government  now  controls 
practically  the  entire  trade  of  the  country,  and 
when  the  war  comes  to  an  end,  so  complete  a  trans- 
formation will  take  place  that  it  will  be  impossible 
immediately  to  bring  the  system  to  a  stop.     The 

» Cf.  Chap.  7. 

«  New  Republic,  XIV,  No.  172,  pt.  11,  p.  9. 


THE  NEED   OF  RECONSTRUCTION         11 

Board  of  Trade  has  given  the  matter  most  careful 
consideration,  and  it  seems  that  the  machinery  that 
has  been  gradually  wound  up  must  be  gradually 
unwound."  ^  Some  persons  believe  that  the  pro- 
cess of  "unwinding"  will  be  a  long  one,  and  that, 
in  consequence,  the  period  of  regulation  will  be  of 
considerable  duration. 

Concrete  illustrations  of  the  prospective  regu- 
lations may  be  given.  Government  control  over 
the  importation  of  all  dyestuffs  into  the  United 
Kingdom  for  not  less  than  ten  years  after  the  war 
is  predicted  by  Sir  Albert  Stanley.  The  object  is 
to  safeguard  English  industries  against  the  German 
producers.  The  proposed  control  is  to  take  the  form 
of  a  licensing  system,  and  licensing  authority  is  to 
be  established  by  the  Board  of  Trade.^  Recent 
reports  of  English  committees  recommend  the  pro- 
hibition of  imports  from  all  enemy  countries  of 
manufactured  or  semi-manufactured  products  of 
iron  and  steel  during  the  reconstruction  period.  A 
committee  considering  the  needs  of  the  engineering 
trades  urged  the  shutting  off  of  engineering  products 
except  under  license ;  and  similar  recommendations 
have  been  made  with  reference  to  electrical  goods ; 
the  question  of  general  control  over  important  ex- 
ports and  imports  has  also  been  considered.' 

The  future  control  of  capital  issues  has  received 

1  Com.  Rept.,  Feb.  2,  1918,  p.  442;   July  29,  1918,  pp.  376-377. 

2  Ibid.,  June  24,  1918,  pp.  1148-1149. 

'Com.  Rept..  July  29,  1918,  pp.  376  ff. ;  Tarifif  Series  No.  39, 
"British  Control  of  Imports  and  Exports"  (U.  S.  Dept.  Com.  Publica- 
tion), p.  6. 


12         PROBLEMS  OF  RECONSTRUCTION 

some  study.  The  needs  of  the  war  have  converted 
the  country  into  a  great  workshop  for  war  materials ; 
the  ordinary  peace  industries  have  been  relegated 
to  the  background ;  as  in  the  United  States,  the 
war  industries  have  been  given  the  right  of  way  in 
the  supply  of  men  and  materials,  and  a  great  war 
establishment  has  been  created  which  will  serve 
little  or  no  purpose  when  peace  is  restored.  The 
country  will  then  be  confronted  with  the  serious 
problem  of  converting  back  again  from  a  war  to  a 
peace  industrial  basis.  But  there  is  in  prospect  a 
shortage  of  material  and  financial  resources.  Thus, 
it  is  suggested  that  the  wisest  course  to  follow  is 
to  adopt  the  war  idea  of  preference,  so  that  indus- 
tries which  serve  the  most  pressing  peace  needs 
shall  receive  the  first  and  largest  share  of  the  avail- 
able resources.  This,  of  course,  implies  the  con- 
tinuation of  Government  direction  until  industry  is 
again  firmly  established. 

This  phase  of  the  problem  is  stated  by  an  Eng- 
lish authority  as  follows:  "The  difficulty  which  we 
foresee,  and  which  is  causing  the  greatest  anxiety 
in  the  minds  of  many  manufacturers,  is  how  they 
are  to  find  the  working  capital  that  will  be  neces- 
sary to  enable  them  after  the  war  to  resume  their 
pre-war  sphere  of  operations,  and  even  to  extend 
these  for  the  advantage  of  the  many  who  will  be 
requiring  employment.  The  working  capital,  i.e., 
the  sums  required  for  stocks  of  raw  materials  and 
goods,  and  also  for  credits  of  customers,  for  the 
same  turnout  as  before  the  war,  will  so  long  as 


THE  NEED  OF  RECONSTRUCTION         13 

present  values  hold,  ...  be  at  least  double  after 
the  war.  The  problem  is  where  this  working  cap- 
ital is  to  come  from.  There  will  be  enormous  de- 
mands upon  the  banks,  and  it  is  doubtful  if  they 
will  have  funds  sufficient  for  the  purpose.  It  will 
not  be  temporary  loans  that  will  be  required,  but 
loans  probably  for  some  years,  until  values  fall. 
Our  banking  system  does  not  lend  itself  to  pro- 
viding funds  upon  such  a  basis."  ^  Elsewhere  it 
was  stated:  "Business  men  in  the  United  States 
and  Germany  .  .  .  have  accumulated  large  sums 
for  after-the-war  trade.  It  would  be  impossible 
for  a  British  manufacturer  to  compete  with  them  if 
his  working  capital  is  taken  either  in  the  form  of 
excess  profits  or  of  conscription  of  wealth.  If  the 
State  takes  the  capital  now,  it  will  have  to  provide 
other  capital  later  on,  or  our  industries  will  be  com- 
pelled to  limit  their  operations  very  largely,  and  the 
business  and  employment  will  go  to  the  foreigner."  ^ 
Summarizing  the  features  of  British  control, 
Professor  Howard  L.  Gray  says:  "What  may  be 
the  permanent  significance  of  this  government  con- 
trol of  industry  cannot  be  foreseen.  Assurance  is 
given  that  all  measures  are  temporary  and  that 
with  peace  the  conditions  of  peace  will  be  restored. 
What  will  have  been  created,  however,  is  precedent 
and  experience;  and  in  the  industrial  world  which 
emerges  from  the  war  these  may  have  more  im- 
portance   than    is   at    the   moment   anticipated."' 

1  Com.  Rept.,  Jan.  14.  1918,  p.  171.  *  Ibid. 

'  Howard  L.  Gray,  War-time  Control  of  Industry,  p.  xv. 


14         PROBLEMS  OF  RECONSTRUCTION 

This  was  written  in  the  latter  part  of  1917.  The 
English  discussions  quoted  above  are  bearing  out 
Professor  Gray's  predictions.  At  the  time  the 
promise  to  restore  the  peace  status  was  made  it 
was  impossible  to  forecast  the  industrial  results  of 
the  war.  Now  it  has  become  evident  that  both 
control  and  other  results  of  the  conflict  have  cre- 
ated a  situation  which  will  require  considerable 
Government  intervention,  at  least  during  the  period 
of  reconstruction.  It  remains  to  be  seen  whether  our 
experience  will  not  be  similar  to  that  of  England. 
To  say  that  German  experience  has  been  the 
same  as  the  English  would  not  cover  the  whole 
case.  Undoubtedly,  many  difficulties  would  be 
encountered  in  restoring  promptly  the  conditions 
as  they  existed  in  1914,  if  that  were  the  purpose ; 
but  one  of  the  new  features  of  the  German  situ- 
ation is  that  it  is  not  the  intention  to  restore  the 
old  order.  Upon  the  basis  of  the  war  experience, 
and  with  a  view  to  the  future  prospects  of  trade, 
marked  changes  are  planned  for  the  industrial 
system  of  the  country.  To  quote  a  recent  Com- 
merce Report:  "It  is  only  to  be  expected  that  at 
the  end  of  the  war  all  powers  cannot  at  once  take 
free  action,  and  when  the  Government  declares  that 
the  State  organization  will  not  be  necessary  in  all 
directions,  but  that,  on  the  contrary,  it  is  hoped 
that  a  great  part  of  the  economic  life  will  be  free, 
then  it  is  undoubtedly  well  not  to  take  too  optimistic 
a  view  of  the  size  of  this  free  domain."  ^     Thus  far 

1  Com.  Rept.,  June  29,  1918,  p.  1226. 


THE  NEED   OF  RECONSTRUCTION         15 

government  organization  is  planned  for  textile  in- 
dustries, groceries,  rubber,  fats  and  oils,  hides  and 
leather,  and  shipping  space. 

I  We  have  probably  said  enough  to  indicate  what 
the  possibilities  are  for  the  prompt  restoration  of 
the  kind  of  industrial  organization  that  existed  in 
1914.  In  our  own  country  we  have  to  face  not  only 
the  questions  of  Government  relation  to  railroads 
and  telegraphs,  but  also  problems  relating  to  the 
ownership  and  operation  of  shipping,  the  transfer 
of  several  million  men  from  military  service  and 
war  industries  to  the  peace  establishments,  the 
financing  of  the  restoration  of  the  peace  industries, 
the  provisions  of  raw  materials  for  new  construc- 
tion and  for  manufactures,  and  the  restoration  of 
normal  conditions  in  our  foreign  trade.  In  short, 
we  must  solve  many  important  questions  involved 
in  turning  industrial  forces  back  into  peace  chan- 
nels. This  is  the  gist  of  the  reconstruction  prob- 
lem. Shall  we  remove  government  control  at  once 
and  allow  industry  to  drift  back  to  a  peace  basis, 
or  shall  we  try  to  direct  the  process  ?  If  the  latter, 
what  method  shall  we  employ  ?  These  two  questions 
must  be  answered  before  we  can  begin  to  solve  all 
the  others.  The  task  confronting  us  is  enormous. 
It  should  not  be  undertaken  lightly  or  upon  hasty  or 
emergency  judgment.  It  requires  most  careful  con- 
sideration, for  our  reconstruction  measures  will 
permanently  affect  the  course  of  our  industry. 

Fundamentally,  the  problem  of  reconstruction  is 
to  find  some  solution  to  all  these  questions.     It  is 


16         PROBLEMS  OF  RECONSTRUCTION 

impossible  to  state  now  how  these  problems  should 
be  solved,  because  their  solution  should  be  based 
on  a  careful  study  of  the  war  measures  and  their 
results  and  on  the  general  effect  of  the  war  on  in- 
dustry. But  it  is  possible  to  state  in  this  place 
what  some  of  the  general  principles  are  that  should 
guide  us  in  this  work.  Reconstruction  measures 
should  not  be  designed  for  the  benefit  of  any  par- 
ticular class,  interest,  or  industry,  nor  even  for  the 
benefit  of  any  particular  nation.  Reconstruction  is 
a  world  problem.  Owing  to  the  dependence  of  the 
parts  of  the  world  on  each  other,  every  nation  is 
concerned  with  the  measures  of  the  other.  The 
test  of  the  reconstruction  policy  in  every  case, 
whether  it  applies  within  national  boundaries  or  to 
international  industrial  relations,  is  that  the  meas- 
ure should  be  designed  to  guarantee  and  safe- 
guard progress.  In  short,  the  goal  is  the  main- 
tenance of  progress  and  the  equitable  distribution 
of  its  benefits.  If  it  is  still  our  opinion  that  in- 
dividual initiative  and  private  incentive  are  neces- 
sary for  that  end,  the  spur  of  private  interest  should 
be  strictly  preserved.  If  it  is  thought  that  progress 
can  be  best  obtained  by  a  large  measure  of  gov- 
ernment direction,  that  should  be  our  course.  The 
purpose  of  the  study  of  reconstruction  in  every 
country  should  be  to  decide  upon  a  national  indus- 
trial policy,  and  our  study  should  have  progressed 
suflBciently  by  the  end  of  the  war  that  at  least  the 
outlines  of  that  policy  will  be  clearly  in  view.  It 
would   be   unfortunate   if   we   had   to   adopt   more 


THE  NEED  OF  RECONSTRUCTION         17 

emergency  legislation  at  the  end  of  the  war  be- 
cause we  had  not  made  up  our  minds  what  national 
policy  we  should  follow.  The  substance  of  the 
recommendations  made  in  this  volume  is  that  we 
should  constitute  committees  at  once  whose  prov- 
ince should  be  to  make  a  thorough  study  of  all  the 
problems  involved.  Abroad,  for  a  year  or  more, 
numerous  official  committees  have  been  making  a 
concrete  study  of  all  the  leading  problems,  and  many 
have  already  made  their  recommendations.  As  a 
result  some  of  the  European  countries  know  what 
their  problems  are  and  have  a  general  idea  of  how 
they  should  be  solved. 

We  have  used  the  term  "reconstruction"  as  if 
its  meaning  were  clear.  It  should  be  explained  that 
the  term  is  not  synonymous  with  restoration  or  re- 
habilitation. It  does  not  mean  rebuilding  of  the 
waste  places  of  France  and  Belgium,  nor  the  re- 
habilitation of  disabled  soldiers  and  seamen.  It  has 
a  broader  significance.  It  signifies  an  industrial 
reorganization  which  will  take  into  account  the 
changes  brought  about  by  the  war. 

The  writer  of  the  report  of  the  subcommittee  of 
the  British  Labor  Party  gave  even  a  wider  mean- 
ing to  the  term.  To  quote  from  the  report :  *'What 
the  Labor  Party  looks  to  is  a  genuinely  scientific 
reorganization  of  the  nation's  industry,  no  longer 
deflected  by  individual  profiteering,  on  the  basis 
of  the  common  ownership  of  the  means  of  produc- 
tion ;  the  equitable  sharing  of  the  proceeds  among 
all  who  participate  in  any  capacity  and  only  among 


18         PROBLEMS  OF  RECONSTRUCTION 

these,  and  the  adoption,  in  particular  services  and 
occupations,  of  those  systems  and  methods  of  ad- 
ministration and  control  that  may  be  found,  in 
practice,  best  to  promote  the  public  interest."  ^ 
Elsewhere  the  report  reads:  "It  behooves  the 
Labor  Party,  in  formulating  its  own  program  for 
reconstruction  after  the  war,  and  in  criticizing  the 
various  preparations  and  plans  that  are  being  made 
by  the  present  government,  to  look  at  the  problems 
as  a  whole.  We  have  to  make  clear  what  it  is  that 
we  wish  to  reconstruct.  It  is  important  to  empha- 
size the  fact  that,  whatever  may  be  the  case  with 
regard  to  other  political  parties,  our  detailed  prac- 
tical proposals  proceed  from  definitely  held  prin- 
ciples. We  need  to  beware  of  patchwork.  The 
view  of  the  Labor  Party  is  that  what  has  to  be 
reconstructed  after  the  war  is  not  this  or  that  Gov- 
ernment department,  or  this  or  that  piece  of  social 
machinery;  but,  so  far  as  Britain  is  concerned, 
society  itself."  ^ 

Apparently  the  author  of  the  report  is  of  the 
opinion  that  the  time  has  come  to  make  over  society 
on  the  new  model.  But,  however  lofty  the  aim,  or 
pure  the  ideal,  we  are  not  yet  ready  for  such  a 
thoroughgoing  system  of  reconstruction.  The  old 
maxim  natura  non  facit  saltum  is  as  true  for  social 
and  industrial  changes  as  for  those  occurring  in  the 
physical  world.  Habit  and  custom  are  the  great 
stabilizers  preventing  society  from  swinging  too  far 
away   from   the   normal.     Even   the   most   roseate 

1  New  Republic,  XIV,  No.  172,  pt.  11,  p.  1.  *  Ibid. 


THE  NEED  OF  RECONSTRUCTION         19 

socialist  would  not  be  happy  if  transported  sud- 
denly to  the  world  of  his  dreams,  because  he  would 
not  feel  at  home.  Another  English  writer  has  ex- 
pressed a  more  reasonable  view:  "The  nation's 
moral  awakening  has  come,"  he  said;  "now  comes 
the  need  for  the  moral  life.  Yet  let  us  not  look 
for  miracles.  Whatever  the  new  England  becomes 
will  be  the  result  of  long  and  painful  effort,  of  sac- 
rifice and  renunciation  of  all  kinds,  made  by  men 
and  women  of  good  will ;  and  we  shall  succeed  in 
proportion  as  we  keep  before  our  eyes  ideals  that 
are  not  so  high  that  they  'lose  themselves  in  the  sky,' 
aiming  at  the  best  practicable  for  the  present,  and 
from  that  slowly  working  on  to  the  best  conceiv- 
able." ^  Most  of  the  reconstruction  committees 
abroad  are  seeking  a  practical  solution  of  the  per- 
plexing problems  that  have  grown  out  of  the  war. 
Their  aim  is  to  secure  a  prompt  and  safe  readjust- 
ment to  peace  conditions,  to  do  justice  to  all  ele- 
ments of  society,  and  to  promote  progress. 

1  After-war  Problems,  Earl  of  Cromer  and  others,  p.  14,  ed.  W.  H. 
Dawson. 


CHAPTER  II 
WAR  CONTROL 
Food  Products 

The  war  has  produced  material  changes  in  the 
industrial  organization  of  the  country.  Upon  the 
peace  establishment  has  been  superimposed  a  war 
control  which  ramiifies  into  all  the  important  fields 
of  industry.  Not  only  have  some  of  the  funda- 
mental domestic  industrial  relations  undergone 
change,  but  foreign  economic  relations  as  well  no 
longer  exist  as  before.  The  war  statutes,  with  the 
control  they  impose,  together  with  regulations  in- 
volved in  numerous  voluntary  measures,  are  only 
partly  responsible  for  the  new  conditions.  To  a 
great  extent  the  war  itself,  with  its  demands  for 
men  and  materials,  is  responsible  for  changes  quite 
apart  from  those  produced  by  the  control  involved 
in  the  war  laws. 

War  creates  exceptional  conditions  affecting  trad- 
ing, and  it  is  found  necessary  to  bring  the  various 
grades  of  buyers  and  sellers  under  restrictions. 
War  on  a  modern  scale  also  requires  the  nation  to 
husband  its  resources  of  men,  materials,  and  credit. 
Conservation  and  economy  must  be  practiced  in 
these  respects.  All  other  uses  than  those  of  the 
nation  must  be  diminished  or  postponed.     More- 

20 


WAR  CONTROL  21 

over,  an  organization  whicli  suits  the  needs  of  peace 
is  inadequate  in  modern  war,  where  control  over  pro- 
duction and  consumption  must  be  largely  centralized 
under  government  supervision.  Industries,  as  well 
as  military  forces,  must  be  mobilized.  This  involves 
the  corollary  that  industries  are  organized  in  a 
way  that  best  suits  the  uses  of  war,  and  the  new 
emphasis  is  on  the  industries  which  serve  the  pur- 
pose of  the  war.  These  considerations  raise  a  num- 
ber of  important  questions :  What  are  the  war 
measures  of  the  United  States  and  what  changes 
have  they  produced?  What  other  results  have 
been  the  products  of  the  war  ?  The  answer  to  these 
questions  takes  us  a  step  further  in  our  study  of 
reconstruction.  All  the  while,  the  ultimate  ques- 
tion looms  before  us  :  Can  we  get  back  to  our  former 
status,  if  that  is  our  purpose,  and  can  we  make  good 
use  in  the  future  of  any  of  the  industrial  results  of 
the  war  ? 

War  control  in  the  United  States  has  been  de- 
veloped under  a  relatively  few  acts.^  Both  as  a 
result  of  these  statutes,  and  of  various  voluntary 

1  Public  No.  20,  65th  Congress,  S.  2133  (Amended  War  Risk  In- 
surance) ;  Public  No.  24,  65th  Congress,  H.  R.  291  (Espionage  Act) ; 
Public  No.  23,  65th  Congress,  H.  R.  3971  (Urgent  Deficiency  Act); 
Public  No.  50,  65th  Congress,  H.  R.  4280  (War  Tax  Bill) ;  Public  No. 
41,  65th  Congress,  H.  R.  4961  (Food  Act) ;  Public  No.  91,  65th  Con- 
gress, H.  R.  4960  (Trading  with  the  Enemy  Act) ;  Public  No.  90,  65th 
Congress,  H.  R.  5723  (Amended  War  Risk  Insurance) ;  Public  No. 
102,  65th  Congress,  S.  3389  (Housing,  etc) ;  Public  No.  106,  65th  Con- 
gress, S.  3754  (Daylight  Saving) ;  Public  No.  107,  65th  Congress,  S. 
3752  (Railway  Control  Bill) ;  Public  No.  121,  65th  Congress,  S.  3714 
(War  Finance  Corporation). 


££  PROBLEMS  OF  RECONSTRUCTION 

measures,  control  has  been  rapidly  extended  until  it 
includes  foods,  feeds,  fuel  including  fuel  oil  and 
natural  gas,  fertilizers,  and  the  raw  materials  neces- 
sary for  their  production,  and  tools,  implements,  and 
machines  used  for  the  production  of  the  above  com- 
modities. Control  also  includes  railways,  tele- 
graph and  telephone  lines,  and  shipping,  and  the 
regulation  of  prices  and  profits  in  many  industries 
which  administer  to  government  and  civilian  con- 
sumption. To  a  considerable  extent,  also,  the 
supply  of  labor  and  capital  is  brought  under  con- 
trol ;  ^  less  essential  uses  are  either  not  served  at  all, 
or  with  diminished  portions.  By  systems  of  prior- 
ity a  number  of  materials  are  ranked  in  order  of 
preference,  and  industries  and  consumers  are  served 
in  that  order.  The  priority  system  has  recently 
been  applied  to  a  certain  extent  to  the  supply  of 
unskilled  labor.^  Finally,  not  only  are  the  imports 
and  exports  of  the  country  under  control,  but 
American  products  destined  for  consumption  in 
neutral  countries  are  brought  under  careful  super- 
vision, even  within  the  neutral  countries.  This, 
of  course,  is  worked  out  through  cooperation  with 
designated  associations  within  those  countries.  The 
growth  of  control  has  produced  many  new  indus- 
trial features  and  is  pregnant  with  many  possibil- 
ities for  the  future. 

The  joint  resolution  declaring  a  state  of  war 
between  the  United  States  and  Germany  was  ap- 
proved by  the  President  April  6,  1917.     For  some 

1  Cf .  infra.  «  O.  B.,  July  15,  1918,  p.  2. 


WAR  CONTROL  23 

time  before  that  date,  however,  the  Council  of 
National  Defense  had  been  at  work  on  a  prelim- 
inary organization  of  the  industries  of  the  country 
preparatory  to  war.  This  Council  was  created  un- 
der authority  of  an  act  approved  August  29,  1916.^ 
It  was  fully  organized  by  March  3,  1917.^  The 
purpose  of  this  measure  as  stated  in  section  2  was 
"for  the  coordination  of  the  industries  and  resources 
for  the  national  security  and  welfare."  The  Coun- 
cil is  composed  of  the  Secretaries  of  War,  Navy, 
Interior,  Agriculture,  Commerce,  and  Labor.  It  is 
assisted  by  an  advisory  commission,  appointed  by 
the  President,  "consisting  of  not  more  than  seven 
persons,  each  of  whom  shall  have  special  knowledge 
of  some  industry,  public  utility,  or  the  development 
of  some  natural  resources,  or  be  otherwise  specially 
qualified,  in  the  opinion  of  the  Council,  for  the  per- 
formance of  the  duties  hereafter  provided."  ^  The 
Council  and  its  agencies  "have  sought  to  serve  as  a 
channel  through  which  the  best  professional  and 
industrial  intelligence  of  the  country  could  make 
itself  most  effectively  available  to  the  government 
departments."  ^  Thus,  this  organization  has  be- 
come the  most  important  connecting  link  between 
the  Government  and  the  business  of  the  country. 
Indeed,  it  is  much  more  than  a  connecting  link, 
for  through  it  the  Government  secures  cooperation 
with  the  industries,  and  much  of  the  government 

^  Cf.  First  Annual  Report  of  the  Council  of  National  Defense,  p.  6, 
The  United  States  at  War  (Library  of  Congress),  pp.  40  ff. 

^Ibid.  Ubid.,pp.S,9.  *  Ibid, 


24  PROBLEMS  OF  RECONSTRUCTION 

control  operates  through  some  of  the  divisions  of 
the  Council.  This  is  a  new  feature  in  the  conduct 
of  war.  But  the  essential  thing  from  our  present 
point  of  view  is  that  it  creates  a  new  relation  be- 
tween Government  and  industry  —  a  relation  which 
enables  State  and  industry  to  work  in  greater  har- 
mony. 

To  cover  the  field  effectively,  a  number  of  com- 
mittees were  created,  subordinate  to  the  Council. 
Among  these  were  the  committees  on  coal  pro- 
duction, shipping,  inland  waterways,  and  women's 
defense  work,  the  general  munitions  board,  the  com- 
mercial economy  board,  and  the  aircraft  produc- 
tion board.  The  Advisory  Council,  also,  is  assisted 
by  a  large  number  of  subordinate  bodies.  In  many 
cases  these  are  grouped  by  industries,  the  members 
of  the  committees  being  representatives  of  the  par- 
ticular industries.^  As  the  Government  expanded 
its  war  activities  it  was  found  necessary  to  create 
new  organizations  which  gave  opportunities  for 
better  adjustments.  On  July  28,  1917,  the  Council 
of  National  Defense,  with  the  approval  of  the 
President,  created  the  War  Industries  Board,  — 
a  body  which  has  since  developed  into  a  large  or- 
ganization.^ This  board  functions  as  the  Govern- 
ment clearing  house  for  the  war  industrial  needs. 
One  of  its  important  activities  is  to  assist  the  pur- 
chasing departments  of  the  Army  and  Navy;  in 
this  activity  it  often  acts  in  conjunction  with  the 

^  First  Annual  Report  of  the  Council  of  National  Defense  (1917), 
pp.  97  ff.  »  O.  B.,  Aug.  3,  1918,  p.  3. 


WAR  CONTROL  25 

Federal  Trades  Commission  which  studies  costs  of 
production  and  thereby  provides  the  information 
upon  which  a  reasonable  price  is  fixed  for  gov- 
ernment purchases,  those  of  other  domestic  con- 
sumers and  the  allies.^  It  controls,  with  the  assist- 
ance of  the  Export  Council,  the  buying  of  the  Allies. 
The  activities  of  the  War  Industries  Board  also 
dovetail  into  those  of  other  elements  of  the  gov- 
ernment organization.  It  has  recently  rendered 
assistance  to  the  work  of  the  Capital  Issues  Com- 
mittee of  the  War  Finance  Corporation  in  an- 
nouncing that  it  would  withhold  priority  assistance 
to  new  undertakings  not  essential  for  the  public 
interest,  *' without  which  new  construction  of  the 
character  mentioned  will  frequently  be  found  im- 
practicable." 2  In  a  similar  way  it  assists  the 
labor  administration  in  the  conservation  of  labor. 
According  to  a  resolution  adopted  by  the  Board  at 
a  meeting  July  11,  1918:  "The  practice  of  man- 
ufacturers using  competitive  peace-time  methods 
in  the  procurement  of  labor,  resulting  in  the  with- 
drawal of  labor  from  war  industries,  is  strongly  dis- 
approved, and  henceforth  this  board,  through  its 
priority  division,  will  in  proper  cases  withhold 
priority  assistance  from  employers  who  persist  in 
pursuing  such  methods."  ^  By  a  very  simple 
process,  therefore,  pressure  is  brought  to  bear  on 
recalcitrant  producers  to  obey  the  regulations  of 
the  various  administrative  bodies. 

^  Cf.  purchasing  agreements  for  copper,  iron,  and  steel,  etc.,  O.  B. 
•  O.  B.,  July  5,  1917,  p.  16.  »  O.  B.,  July  16,  1918,  p.  5. 


26  PROBLEMS  OF  RECONSTRUCTION 

In  addition  to  the  national  body,  state  councils 
of  defense  were  promptly  formed.  Like  the  Na- 
tional Council,  "the  State  bodies  are  subdivided 
into  committees  dealing  with  many  phases  of  de- 
fense work  —  military,  publicity,  transportation, 
finance,  food,  industries  and  labor,  minerals,  medi- 
cal, science,  legal,  educational,  coordination  of  in- 
dependent societies."  ^  On  August  9,  1917,  it  was 
announced  that  State  councils  had  been  formed  in 
all  48  States  and  in  the  District  of  Columbia.  Some 
were  created  by  act  of  the  legislature  and  received 
appropriations.  Most  of  them  "extended  their  in- 
fluence by  the  creation  of  a  state-wide  system  of 
local  organization  based  on  the  county  as  the  unit, 
but  sometimes  reaching  down  as  far  as  the  school 
districts  and  municipalities."  ^  The  section  of  the 
Council  of  National  Defense  on  "Cooperation  with 
States"  coordinates  the  activities  of  all  the  bodies 
within  the  nation.^ 

The  war  has  called  into  existence  also  great  or- 
ganizations in  connection  with  the  administration 
of  the  Food,  Espionage,  Trading  with  the  Enemy, 
and  other  acts.  These  will  be  discussed  in  con- 
nection with  our  discussion  of  those  acts. 

It  is  probable  that,  sooner  or  later,  some  form  of 
food  control  would  have  been  adopted  in  the  United 
States  even  if  the   country   had   not   entered   the 

1  O.  B.,  Aug.  9.  1918,  p.  3. 

'  Ibid.  For  the  various  activities  of  the  state  councils  see  O.  B., 
June  11.  1917,  p.  3;  June  18,  1917,  p.  5;  July  19,  1917,  p.  11;  Nov. 
22,  1917,  p.  3;  Dec.  18,  1917,  p.  3;  Jan.  7,  1918,  p.  3. 

'  First  Annual  Report  Council  of  National  Defense,  p.  101. 


WAR  CONTROL  27 

war.*  The  shortage  of  shipping,  which  increased  the 
diflSculties  of  England  and  France  in  obtaining  food- 
stuffs from  more  remote  parts  of  the  world,  in- 
creased their  dependence  on  us.  Meanwhile,  Ameri- 
can stocks  were  diminishing.^  Both  conservation 
and  stimulation  of  production  were  urged  as  the  im- 
mediate policy  for  this  country.'  This  was  part 
of  Mr.  Hoover's  plan  in  April  1917.  Indeed,  some 
of  Mr.  Hoover's  arguments  for  food  control  ap- 
plied as  well  to  the  conditions  before  we  entered 
the  war  as  after.  He  urged,  for  example,  that  the 
hardships  of  the  consumer  were  due  in  part  to  specu- 
lative prices,  that  export  prices  were  subject  to  the 
will  of  allied  buyers,  and  that  control  was  neces- 
sary on  account  of  shipping  difficulties  within  the 
United  States.  *'The  situation  is  new,"  said  Mr. 
Hoover;  "the  old  distributive  safeguards  are  torn 
away  by  isolation  from  the  reciprocal  markets 
abroad,  the  extinction  of  a  free  export  market,  and 
of  free  export  transportation."  * 

During  the  months  from  April  to  August  the 
consumer  could  point  to  the  rapid  changes  of  prices 
on  the  grain  exchanges  as  the  source  of  much  of  his 
trouble.  On  the  Chicago  market,  No.  1  northern 
spot   wheat   ranged   from   $2.05^^   to   $2.93    during 

'  Cf.  Com.  and  Fin.  Chron.,  April  21,  1917.  "The  Administration, 
it  is  said,  has  long  been  considering  the  possibility  that  the  United 
States  might  have  come  to  the  adoption  of  some  sort  of  food  control  to 
insure  a  satisfactory  conclusion  of  the  war  with  Germany." 

2  Com.  and  Fin.  Chron.,  April  7.  1917,  p.  1328. 

»  Cong.  Record,  Com.  and  Fin.  Chron..  April  7.  1917,  p.  1328;  April 
14,  1917,  p.  1447.  <  O.  B.,  July  11,  1917,  p.  3. 


28  PROBLEMS  OF  RECONSTRUCTION 

April ;  from  $2.65  to  $3.40  during  May ;  from  $2.49 
to  $3.10  during  June,  and  from  $2.17  to  $3.00  dur- 
ing July.^  In  this  connection,  Mr.  Hoover  urged 
that  the  "unbearable  increase  in  the  margin  be- 
tween producer  and  consumer  is  due  not  only  to 
rank  speculation,  but  more  largely  to  the  wide  mar- 
gin of  profit  demanded  by  every  link  in  the  chain 
(of  distribution)  to  assure  them  from  the  great 
hazards  of  trade  in  the  widely  fluctuating  and 
dangerous  price  situation  during  a  year  when  all 
normal  stabilization  has  been  lost  through  the 
interruption  of  world  trade  and  war."  *  With  the 
entrance  of  the  United  States  into  the  war  special 
reasons  arose  for  control.  This  country  was  now  a 
participant  and  was  vitally  interested  in  the  out- 
come. It  became  necessary  to  lend  active  aid  to  our 
associates.  Moreover,  if  effective  work  was  to  be 
done  in  this  country,  it  was  necessary  to  guard 
against  the  evils  of  industrial  unrest  sure  to  arise 
with  mounting  prices. 

President  Wilson  outlined  the  administration 
food  control  plan  on  May  19.  He  proposed  to  draw 
a  "sharp  line  of  distinction  between  the  normal  ac- 
tivities of  the  Government  represented  in  the  De- 
partment of  Agriculture  in  reference  to  food  pro- 
duction, conservation,  and  marketing  on  the  one 
hand  and  the  emergency  activities  necessitated  by 
the  war  in  reference  to  the  regulation  of  food  dis- 
tribution and  consumption  on  the  other."     Meas- 

»  Annual  Report  of  tlie  Chicago  Board  of  Trade,  1917,  pp.  62  ff. 
*0.  B.,  July  11,  1917,  p.  3. 


WAR  CONTROL  29 

ures  administered  through  the  Department  of 
Agriculture  were  to  be  handled  as  in  normal  times; 
but  "the  powers  asked  for  over  distribution  and 
consumption,  over  exports,  imports,  prices,  pur- 
chases, and  requisition  of  commodities,  storing,  and 
the  like,  which  may  require  regulation  during  the 
war,  will  be  placed  in  the  hands  of  a  commissioner  of 
food  administration  appointed  by  the  President  and 
directly  responsible  to  him."  Thus,  the  President 
asked  Congress  for  power  to  authorize  inquiries  into 
the  existing  stocks  of  foodstuffs,  to  learn  costs  and 
practices  in  the  producing  and  distributing  indus- 
tries, to  prevent  unwarranted  hoarding,  to  requisi- 
tion when  necessary  food  supplies  for  the  public 
use.  Authority  was  also  asked  to  establish  prices 
"but  not  in  order  to  limit  the  profits  of  the  farmers, 
but  only  to  guarantee  to  them  when  necessary 
a  minimum  price  which  will  insure  them  a  profit 
where  they  are  asked  to  attempt  new  crops,  and  to 
secure  the  consumer  against  extortion  by  breaking 
up  corners  and  attempts  at  speculation  when  they 
occur  by  fixing  temporarily  a  reasonable  price  at 
which  middlemen  must  sell."  ^ 

Even  before  the  President  announced  his  plan, 
bills  began  to  appear  in  Congress  covering  various 
aspects  of  the  food  problem.  A  reference  to  their 
titles  suggests  their  scope  and  purpose  :  "To  regulate 
prices,"  "to  authorize  the  fixing  of  prices,"  "to  pro- 
hibit the  use  of  foodstuffs  in  the    manufacture   of 

^  O.  B.,  May  21,  1917,  p.  4;  also  quoted  in  Com.  and  Fin.  Chron., 
May  26,  1917,  p.  2072. 


30  PROBLEMS  OF  RECONSTRUCTION 

alcoholic  liquors,"  "to  license  corporations  engaged 
in  storing  food  products  and  in  interstate  trade," 
*'to  punish  speculators,"  "to  prohibit  dealing  in 
futures,"  "to  regulate  profits,"  and  "to  punish 
monopolizers  of  food  products."  ^ 

On  May  7,  1917,  a  bill  was  reported  favorably  in 
the  House  covering  a  portion  of  the  President's  plan 
as  subsequently  stated.  June  11,  this  bill  was  re- 
placed by  another  ^  which,  after  meeting  much  hard 
sledding  both  in  the  House  and  Senate,  finally  re- 
ceived the  President's  signature  August  10  as  Public 
No.  41, — the  present  food-control  bill.  Both  the  list 
of  commodities  to  be  included  and  the  methods  of 
control  were  stumbling-blocks  throughout  the  de- 
bates. It  proved  difficult  to  enact  a  measure  which 
would  pass  muster  in  both  houses,  as  is  shown  by 
the  history  of  the  bill.^  So  vexing  were  the  numerous 
amendments  that  Mr.  Lever  was  led  to  exclaim  on 
July  24  that  "the  delays  upon  this  food  bill  almost 
amount  to  a  national  scandal."  ^  At  one  time  the 
question  of  one-man  or  three-man  control  threat- 
ened to  hold  up  the  bill.  Of  a  similar  purport  was 
an  amendment  offered  June  22  by  Representative 
Montague   of   Virginia   defining   the   power   of   the 

1  Cong.  Record,  65th  Cong.,  1st  Sess.,  pp.  1722,  2042,  2080,  2085, 
2164,  2575,  2777,  5635,  7919.  2  H.  R.  4961. 

^  Favorably  reported  June  1 1 ;  amended  and  passed  by  the  House,  June 
23.  Referred  to  Senate  committee  of  Agriculture  and  Forestry,  June  25 ; 
amended  and  passed  the  Senate,  July  21 ;  House  disagrees  to  Senate 
amendments  and  agrees  to  conference,  July  24;  conference  reports  in 
Senate  and  House,  Aug.  2,  3.  Cf.  Cong.  Record,  65th  Cong.,  1st  Sess., 
pp.  4189,  4196,  4356,  5367,  5430-5434,  5473,  5709,  5720,  5733. 

*  Cong.  Record,  65th  Cong.,  1st  Sess.,  p.  5432. 


WAR  CONTROL  31 

President  as  "hereinafter  provided,"  thus  specify- 
ing and  Hmiting  the  control.  The  opponents  of  the 
proposed  h'censing  system  for  foods  and  fuel  were 
able  to  cast  66  out  of  189  against  the  licensing  pro- 
vision.^ They  objected  to  this  clause  on  the  ground 
that  it  was  unconstitutional  and  that  it  gave  the 
President  legislative  powers.  Another  attempt  to 
limit  the  control  of  the  President  was  in  an  amend- 
ment offered  July  21  by  Senator  Owens  of  Okla- 
homa, providing  for  a  joint  Congressional  committee 
on  expenditures  in  the  conduct  of  the  war.^  This 
was  dropped  later  when  the  President  urged  (July 
23)  that  "I  could  only  interpret  the  final  adoption 
of  section  23  as  arising  from  a  lack  of  confidence  in 
myself."  ^ 

President  Wilson's  plan,  as  outlined  above,  re- 
ferred only  to  the  control  of  foods,  but  during  the 
debates  a  considerable  number  of  other  articles 
were  included  by  amendments.  The  additions  in- 
cluded cotton,  wool,  leather,  iron  and  steel,  copper, 
and  lumber.  Even  the  regulation  of  prices  of  man- 
ufactured products  was  urged  with  considerable  ap- 
proval at  one  time,  to  compensate  the  farmer  for 
the  control  of  food  prices.*  Amendments  also 
provided  for  federal  purchase  and  sale  of  flour, 
meal,  beans,  and  potatoes,  with  provision  for  requi- 
sition for  military  purposes.^     Nor  did  coal  oper- 

1  Cong.  Record,  65th  Cong.,  1st  Sess.,  p.  5468.  2  Ibid.,  p.  6842. 

3  Quoted  from  Com.  and  Fin.  Chron.,  July  28,  1917,  p.  341. 
*  Cong.  Record,  65th  Cong.,  1st  Sess.,  p.  5433. 

»  Ibid.,  pp.  3561  ff.,  3937  S..  4131  S.,  5430,  5433,  and  provisions  in 
the  act. 


S2  PROBLEMS  OF  RECONSTRUCTION 

ators  and  oil  magnates  escape  attention,  for  amend- 
ments provided  for  taking  over  of  these  indus- 
tries.^ "Bone  dry"  provisions  at  one  time  caused 
considerable  trouble. 

The  act  as  approved  provided  for  the  control  of 
*' foods,  feeds,  fuel  including  fuel  oil  and  natural 
gas,  and  fertilizer  and  fertilizer  ingredients,  tools, 
utensils,  implements,  machinery,  and  equipment  re- 
quired for  the  actual  production  of  foods,  feeds,  and 
fuel."  ^  The  act  makes  it  unlawful  for  any  person 
wilfully  to  destroy  any  necessaries  for  the  purpose 
of  enhancing  the  price  or  restricting  the  supply ; 
knowingly  to  commit  waste  or  wilfully  to  permit 
preventable  deterioration  of  any  necessaries  in  con- 
nection with  their  production,  manufacture,  or  dis- 
tribution ;  to  hoard,  monopolize,  or  attempt  to 
monopolize,  either  locally  or  generally,  any  neces- 
saries ;  to  engage  in  any  discriminatory,  unfair,  or 
deceptive  practice,  or  to  make  unfair  or  unreason- 
able charges  in  handling  and  dealing  with  any  of 
the  necessaries.  It  was  also  made  unlawful  to 
"conspire,  combine,  agree,  or  arrange  with  any 
other  person,  (a)  to  limit  the  facilities  for  transpor- 
tation, producing,  harvesting,  manufacturing,  sup- 
plying, storing,  or  dealing  in  any  necessaries;  (b) 
to  restrict  the  supply  of  any  necessaries ;  (c)  to  re- 
strict distribution  of  any  necessaries ;  (d)  to  pre- 
vent, limit,  or  lessen  the  manufacture  or  produc- 
tion of  any  necessaries  in  order  to  enhance  the  price 

1  Cong.  Record,  64th  Cong.,  1st  Sess.,  pp.  3561  S.,  3937  ff.,  4131  S. 

2  Public  No.  41,  Goth  Cong.,  H.  R.  49&1. 


WAR  CONTROL  33 

thereof,  or  (e)  to  exact  excessive  prices  for  any 
necessaries ;  or  to  aid  or  abet  the  doing  of  any  act 
made  unlawful  by  this  section." 

The  act  empowered  the  President,  if  he  deemed 
it  essential,  to  license  the  importation,  manufacture, 
storage,  mining,  or  distribution  of  any  necessaries. 
Section  11  gives  the  President  power  under  certain 
conditions  to  purchase,  store,  provide  storage  facil- 
ities for  and  to  sell  for  cash  at  reasonable  prices, 
wheat,  flour,  meal,  beans,  and  potatoes.  The  pro- 
ceeds of  such  sales  are  to  be  used  as  a  "revolving 
fund  for  further  carrying  out  the  purposes  of  this 
act."  Power  is  given,  under  certain  conditions,  to 
requisition  and  take  over  for  use  or  operation  of  the 
Government,  any  factory,  packing  house,  oil  pipe 
line,  mine,  or  other  plant  where  necessaries  are 
produced.  Authority  is  given,  also,  to  guarantee 
the  price  of  wheat,  but  "the  guaranteed  prices  for 
the  several  standard  grades  of  wheat  for  the  crop 
of  nineteen  hundred  and  eighteen,  shall  be  based 
on  number  one  northern  spring  or  its  equivalent  at 
not  less  than  $2.00  per  bushel  at  the  principal  in- 
terior primary  markets."  ^  The  provisions  of  the 
act  relating  to  the  control  of  fuel  are  discussed  in 
the  next  chapter. 

The  act  provides  penalties  for  infraction  of  the 
law,  and  the  President  is  authorized  to  make  "such 
regulations  and  to  issue  such  orders  as  are  essen- 
tial effectively  to  carry  out  the  provisions  of  this 
act."     To  further  accomplish   the  purpose   of  the 

*  Section  14,  p.  6. 


34  PROBLEMS  OF  RECONSTRUCTION 

law  he  may  employ  any  agency  or  agencies,  ac- 
cept the  service  of  any  persons  "without  compen- 
sation," and  use  other  means  to  make  the  act 
effective.^ 

From  this  brief  summary  of  the  bill,  the  reader 
may  get  some  idea  of  the  changes  it  will  produce  in 
our  present  economic  relations.  "The  whole  food 
control  system,"  it  was  said  recently,  "while  an 
outgrowth  of  necessity,  embarks  the  United  States 
upon  a  field  of  enterprise  which  has  heretofore  been 
entirely  foreign  to  its  principles  and  practice  of  gov- 
ernment and  which,  both  in  the  practical  working 
of  the  system  and  in  its  general  effect  upon  the 
governmental  methods  and  policies,  will  neces- 
sarily have  to  be  developed  by  a  process  of  ex- 
periment." ^ 

While  the  student  of  reconstruction  is  interested 
in  the  methods  employed  in  working  out  various 
phases  of  war  control,  he  thinks  principally  of  the 
results,  for  reconstruction  problems  grow  out  of  the 
results  of  the  war  and  of  war  control.  These  ques- 
tions will  be  discussed  in  later  chapters.  Accord- 
ing to  section  24,  the  act  is  designed  only  as  a  war 
measure.  Apparently,  it  will  be  repealed  automat- 
ically when  the  fact  and  the  date  of  the  termination 
of  the  war  with  Germany  are  proclaimed  by  the 
President.^ 

The  second  portion  of  President  Wilson's  food 
plans  was  covered  in  another  act  dated  August  10.^ 

1  Sections  1,  2,  p.  1.  «  Journal  of  Polit.  Econ.,  XXV,  p.  847. 

8  Section  24,  p.  9.  *  Cf .  ante,  p.  28. 


WAR  CONTROL  35 

This  measure  is  significant  for  our  present  study 
only  because  it  indicates  another  tendency  in  the 
relation  of  government  to  industry,  namely,  the 
increase  of  promotion  or  beneficial  work.^  Ap- 
propriations were  made  for  a  number  of  purposes. 
A  grant  was  made  of  $885,000  for  use  in  prevention, 
control,  and  eradication  of  diseases  of  live  stock,  and 
for  the  conservation  of  meat,  poultry,  dairy,  and 
other  animal  products.  Also,  $2,500,000  for  pro- 
curing, storing,  and  furnishing  seeds,  the  proceeds 
of  sale  to  be  used  as  a  "revolving  fund"  until  June 
30,  1918.  For  the  prevention  and  eradication  of 
insects  and  diseases  injurious  to  plants  the  ap- 
propriation was  $441,000.  Another  amount, 
$4,348,000,  was  granted  for  "increasing  food  pro- 
duction and  elimination  of  waste  and  promoting 
conservation  of  food  by  educational  and  demon- 
strational  methods,  through  county,  district  and 
urban  agents."  Finally,  the  sum  of  $650,000  was 
to  be  devoted  to  miscellaneous  work  of  the  De- 
partment of  Agriculture,  including  special  work  in 
making  estimates  of  crops,  aid  to  agents  in  various 
states  supplying  farm  labor,  for  enlarging  the  in- 
formational work  of  the  Department,  and  to  defray 
expenses  in  printing  and  distributing  emergency 
leaflets,  posters,  and  other  publications.^  Section 
27    of    the    food    act    had    already    appropriated 

1  Cf.  ante,  p.  28. 

'  Public  No.  40,  65th  Congress :  "  An  Act  to  provide  further  for  the 
National  security  and  defense  by  stimulating  agriculture  and  facilitating 
the  distribution  of  agricultural  products." 


86  PROBLEMS  OF  RECONSTRUCTION 

$10,000,000  to  purchase  nitrate  of  soda  to  be  dis- 
posed of  to  farmers  for  cash  at  cost.^ 

Some  steps  had  already  been  taken  to  inaugurate 
food  administration  before  the  passage  of  the  food 
control  bill.  On  April  7,  the  Council  of  National 
Defense,  by  resolution,  asked  Mr.  Hoover  to  take 
the  chairmanship  of  the  committee  on  food  supply 
and  prices.'^  His  knowledge  of  the  European  situ- 
ation, and  his  work  with  the  Belgian  Relief  Com- 
mission, promised  to  make  his  services  especially 
valuable.  As  the  work  was  outlined  for  the  new 
chairman,  he  was  to  "report  to  the  council  such 
experiences  as  European  governments  have  had, 
and  advise  as  to  proper  methods  of  preventing  re- 
currence, so  far  as  practicable,  of  the  evils  arising 
out  of  speculative  prices,  and  to  stimulate  increased 
production  of  all  food  supplies."  ^ 

When  President  Wilson  formulated  his  plan  of 
food  control  on  May  19,  he  stated  that  he  had  in- 
vited Mr.  Hoover  to  undertake  the  new  task  of  food 
administration  and  that  the  invitation  had  been 
accepted. 

The  food  problem  of  the  United  States,  as  Mr. 
Hoover  conceived  it,  was  "to  secure  the  effective 
and  economical  distribution  of  these  supplies ;  to 
induce  as  large  an  export  surplus  for  the  benefit  of 
our  allies  as  we  can ;  to  protect  our  requirements ; 
to  ask  the  whole  community  to  assist  us  in  build- 
ing up  this  surplus  by  every  effort  of  economy  we 

'  Public  No.  41,  65th  Congress,  p.  13. 

«  Com.  and  Fin.  Chron.,  April  21,  1917,  p.  1555,  "  Ihid. 


WAR  CONTROL  37 

can  devise,  and  to  set  up  such  machinery  as  will 
furnish  this  balance  wheel  on  prices."  ^  With  this 
problem  in  mind,  he  stated  the  cardinal  principles 
of  control  as  follows  :  That  the  food  problem  is  one 
of  wise  administration  and  is  not  expressed  by  the 
words  "dictator,"  or  "controller,"  but  "food  ad- 
ministrator" ;  that  this  administration  can  be  largely 
carried  out  through  the  coordination  and  regulation 
of  existing  legitimate  distributive  agencies  sup- 
plemented by  certain  emergency  bodies  composed 
of  representatives  of  producers,  distributors,  and 
consumers ;  that  the  community  should  be  or- 
ganized for  voluntary  conservation  of  foodstuffs ; 
that,  as  far  as  possible,  all  positions  should  be 
filled  by  volunteers ;  and  finally,  the  independent 
responsibility  of  the  food  administration  directly 
under  the  President  with  the  cooperation  of  the 
Departments  of  Agriculture,  and  Commerce,  of  the 
Federal  Trade  Commission,  and  of  the  railway  execu- 
tives.^ In  short,  the  essence  of  war  administration 
is  "centralized  and  single  responsibility,"  and  the 
"delegation  of  this  responsibility  to  decentralized 
administrative  organs."  The  work  of  the  Food 
Administration  has  been  largely  to  solve  the  prob- 
lems named  above,  and  its  policies  have  been  the 
development  of  the  "cardinal  principles." 

The  American  consumer  received  his  first  in- 
structions in  food  conservation  in  the  economy 
rules    promulgated    by    Mr.    Hoover    on    July    7. 

1  Com.  and  Fin.  Chron.,  June  9,  1917,  p.  2301. 
*Ibid. 


220180 


38  PROBLEMS  OF  RECONSTRUCTION 

Under  the  caption  of  "Win  the  war  by  giving  your 
daily  service,"  the  people  were  urged  to  save  wheat, 
meat,  milk,  fats,  sugar,  and  fuel.  In  the  case  of  the 
perishable  foods,  the  advice  was  to  "double  their 
use  and  improve  your  health,"  and  to  depend  on 
local  supplies  as  far  as  possible.  The  rules  also  in- 
volved the  observance  of  one  wheatless  day  a  week, 
and  the  use  of  beef,  mutton,  or  pork  only  once  a 
day.^  All  this  was  voluntary,  of  course,  as  the 
form  of  the  statement  indicates. 

Administration,  under  the  new  act,  was  inaugu- 
rated the  same  day  the  act  was  approved,  namely, 
August  10,  with  the  appointment  of  Mr.  Hoover  as 
federal  food  administrator.^ 

The  principal  features  of  American  food  admin- 
istration are  the  development  of  control  through  a 
system  of  licensing,  special  measures  for  meeting 
the  wheat  and  sugar  situation,  voluntary  arrange- 
ments with  producers  of  the  lesser  essentials,  and  a 
voluntary  system  of  conservation  as  applied  to  the 
ultimate  consumer  which  involved  the  organization 
of  communities  for  the  purpose  of  economy.  We 
may  discuss  the  development  of  food  control  under 
these  captions. 

According  to  the  Food  Act,  the  licensing  system 
does  not  include  retailers ;  for  the  purpose  of  the 
law  "  a  retailer  shall  be  deemed  to  be  a  person, 
corporation,  firm,  or  association  not  engaged  in  the 
wholesale  business  whose  gross  sales  do  not  exceed 

1  Com.  and  Fin.  Cliron.,  July  14,  1917.  p.  132. 
«0.  B.,  Aug.  11,  1917,  p.  1. 


WAR  CONTROL  39 

$100,000  per  annum."  ^  Nevertheless,  the  retailer, 
whether  close  to  this  margin  or  far  below  it,  feels 
the  pressure  of  the  law,  if  he  violates  its  provisions. 
Thus,  about  October  30,  the  Food  Administration 
announced  that  "the  licensee  shall  not  knowingly 
sell  any  food  commodity  to  any  persons  engaged  in 
the  business  of  selling  such  commodities,  who  shall, 
after  this  regulation  goes  into  effect,  violate  the  pro- 
visions of  the  act  of  Congress  approved  August  10, 
1917,  by  making  any  unreasonable  rate  or  charge 
in  selling  or  otherwise  handling  or  dealing  in  such 
commodity,  or  by  holding,  contracting  for,  or  ar- 
ranging for  any  quantity  thereof  in  excess  of  the 
reasonable  requirements  of  his  business  for  use  or 
sale  by  him  for  a  reasonable  time."  *  This  means 
that  even  the  small  retailers  of  food,  of  whom  there 
are  many  thousands  in  the  United  States,  while 
exempt  from  the  licensing  clause,  are  yet  subject 
to  other  provisions  of  food  control.  They  cannot 
hoard,  monopolize,  waste,  or  destroy  necessary  food 
products,  or  conspire  with  others  to  restrict  pro- 
duction and  sale.  Nor  can  they  exact  excessive 
prices.  While  the  law  provides  no  penalties  for  this 
class  of  dealers,  nevertheless  they  can  be  effectively 
reached  by  shutting  off  supplies  from  the  licensees.' 
It  is  impossible  for  the  reader  to  understand  how 
thoroughly  the  country  is  covered  by  the  licensing 
system  without  a  study  of  some  of  the  principal 
orders  and  proclamations.     One  of   the   earliest   of 

1  Public  No.  41,  65th  Cong.,  section  5,  p.  3. 

2  O.  B.,  Oct.  30,  1917,  p.  2.  '  Ibid. 


40  PROBLEMS  OF  RECONSTRUCTION 

these  was  dated  August  14  and  became  effective 
September  1.  This  required  all  persons,  corpora- 
tions, or  associations  engaged  in  the  storage,  man- 
ufacture, and  distribution  of  wheat  and  rye  to  take 
out  a  license  before  the  date  named  above,  or  suf- 
fer the  penalties.  The  system  was  shortly  extended 
by  the  proclamation  effective  November  1,  1917,  to 
include  producers  and  distributors  of  beef,  pork, 
mutton,  fish,  poultry,  eggs,  milk,  butter,  cheese, 
flour,  sugar,  cereals,  lard,  beans,  peas,  fruits,  certain 
vegetables,  several  varieties  of  canned  goods,  and 
other  commodities.^  Bakers,  hotels,  restaurants,  and 
others  consuming  over  ten  barrels  of  flour  monthly 
were  brought  under  regulation  by  proclamation  ef- 
fective February  15.^  Likewise,  on  the  same  date, 
licenses  were  required  of  persons,  firms,  or  corpora- 
tions handling  commercial  mixed  feeds,  malsters 
(except  brewers  of  malt  liquor  who  do  not  malt 
their  own  grain),  manufacturers  and  distributors 
of  copra,  palm  kernel  oil,  and  peanuts,  salt  water 
fishermen  not  already  licensed,  certain  canners,  and 
producers  of  tomato  soup,  catsup,  and  other  tomato 
products.*  Subsequent  proclamations  brought  un- 
der regulation  producers  and  distributors  of  certain 
kinds  of  fish,  operators  of  poultry  and  egg  packing 
plants,  ginners,  buyers,  etc.,  of  cotton  seed,  pro- 
ducers of  fermented  beverages  containing  more  than 
a  certain  per  cent  of  alcohol.*     The  fertilizer  industry 

1  O.  B.,  Oct.  10,  1917.  p.  2;  Nov.  1,  1917,  p.  1. 

»  Ibid.,  Nov.  12,  1917. 

» Ibid.,  Jan.  14,  1918,  p.  8.  *  Ibid.,  May  15,  1918,  p.  2. 


WAR  CONTROL  41 

was  put  largely  under  control  by  the  proclamation 
effective  March  20,  1918.^  On  June  20,  the  licens- 
ing system  was  applied  to  trading  in  farm  imple- 
ments. Licensees  were  required  to  furnish  infor- 
mation regarding  their  business  whenever  it  was 
deemed  necessary  by  the  Secretary  of  Agriculture. 
They  were  required  to  permit  representatives  of 
this  department  to  inspect  property  and  records. 
Unjust  profits,  resales  within  the  trade  without  rea- 
sonable justification,  attempts  to  monopolize,  un- 
reasonable increase  in  prices  or  restriction  of  sup- 
plies, and  wilful  waste  of  farm  implements  were 
prohibited.^  In  the  case  of  fertilizers  and  farm 
implements,  the  administration  of  the  orders  is  put 
in  the  hands  of  the  Secretary  of  Agriculture.  The 
regulations  referred  to  above  do  not  exhaust  the 
list.  They  are  given  to  present  some  idea  of  the 
extent  of  control  inaugurated  under  the  food  act. 
The  law  also  includes  the  control  of  fuel,  the  regu- 
lation of  which  will  be  discussed  later. 

These  measures  are  frequently  designated  as 
voluntary,  but  that  word  does  not  correctly  describe 
them.  When  the  administrator  finds  it  necessary, 
he  may  require  license  of  persons,  firms,  etc.,  cov- 
ered by  the  law,  and  licensees  are  subject  to  the 
prescribed  penalties.  Nor  is  the  system  voluntary 
as  applied  to  retailers,  for  they  too  must  not  violate 
certain  sections  of  the  act  lest  punishment  over- 
take  them.     This   is   brought   out   clearly   in   the 

1  O.  B.,  Feb.  27,  1918,  p.  3. 

«  Ibid.,  May  17,  1918.  p.  1 ;  June  8,  1918,  p.  16. 


42  PROBLEMS  OF  RECONSTRUCTION 

instructions  given  by  Mr.  Hoover  on  August  23, 
1917,  to  food  administrators  from  nineteen  States 
who  were  summoned  to  Washington.  They  were 
advised  that  their  work  was  to  "correct  abnor- 
malities that  have  crept  into  trade  by  reason  of  the 
world  disturbance";  and  that  the  food  adminis- 
tration "feels  justified  by  its  experience  so  far  in 
counting  on  the  patriotic  cooperation  of  the  great 
bulk  of  business  men";  but  they  were  told  that  "if 
any  persons  try  to  exploit  the  country  in  this  time  of 
war,  they  should  not  hesitate  to  take  steps  to  see  that 
the  drastic  powers  that  Congress  had  conferred  upon 
the  food  administration  in  such  cases  are  employed."  ^ 
The  licensing  system  has  for  years  been  a  familiar 
method  of  controlling  the  liquor  business.  The 
new  feature  is  its  application  to  the  vast  number  of 
enterprises  which  come  within  the  scope  of  the 
food  act.  Whether  applied  to  liquor,  or  to  foods 
and  other  products,  the  effectiveness  of  the  system 
depends  partly  on  the  thoroughness  with  which  the 
local  administrators  enforce  the  orders,  and  partly 
on  an  adequate  information  service  which  quickly 
brings  to  light  infractions  of  the  law.  Early  in  the 
development  of  the  system,  Mr.  Hoover  found  it 
necessary  to  learn  the  practices  of  the  merchants. 
He  therefore  called  upon  Mr.  John  Skelton  Wil- 
liams, comptroller  of  the  currency,  to  request 
national  banks  in  cities  and  towns  of  over  3000 
population  to  indicate  persons  who  might  be  will- 

»  O.  B.,  Aug.  24.  1917.  p.  7;  Com.  and  Fin.  Chron.,  Sept.  15,  1917, 
p.  1059. 


WAR  CONTROL  43 

ing  to  collect  regularly  the  desired  information.  At 
the  end  of  each  week  they  were  to  inform  them- 
selves as  to  prices  charged  by  retail  grocers  and 
other  food  dealers  for  thirty  principal  commodities 
and  report  to  the  food  administration.^  This  work 
was  to  be  performed  without  compensation. 

With  the  development  of  the  control  program  the 
communities  have  been  organized  to  a  considerable 
extent  for  informational  service.  Retail  price  cor- 
respondents are  expected  to  render  weekly  reports 
to  the  local  food  administrators  and  to  the  statistical 
division  in  Washington.  Where  the  reports  are 
regularly  and  carefully  prepared,  the  retailer  whose 
methods  are  unfair  has  small  chance  of  escape. 
The  new  and  significant  feature  of  this  phase  of 
control  is  the  organization  of  consumers,  under 
government  direction,  for  their  own  protection. 
The  system  is  full  of  promise,  but  whether  used  for 
war  or  post-war  purposes  its  success  depends  on 
the  readiness  and  persistence  of  the  volunteer  re- 
porters. 

In  the  case  of  large  manufacturers  and  distribu- 
tors, requisite  information  is  obtained  both  by  rep- 
resentatives of  the  food  administration  and  of  the 
Government.^  Where  costs  of  production  are  sought, 
the  information  is  usually  obtained  through  the 
Federal  Trade  Commission.  We  shall  discuss  this 
matter  below  under  the  caption  of  the  price  policy 
of  the  food  administration. 

1  O.  B.,  Sept.  6,  1917;  Com.  and  Fin.  Chron.,  Sept.  8,  1917,  p.  948. 
«0.  B.,  July  13,  1918,  p.  11. 


44  PROBLEMS  OF  RECONSTRUCTION 

What  has  been  said  hitherto  refers  principally  to 
the  scope  of  the  licensing  system.  Rules  had  to  be 
worked  out  to  prevent  hoarding,  waste,  charging 
unreasonable  prices,  and  to  effect  the  standardi- 
zation of  certain  products.  It  was  announced  on 
October  31  that  no  licensee  would  be  permitted  to 
"keep  on  hand  or  have  in  possession  or  under  con- 
trol by  contract  or  other  arrangement,  at  any  time, 
food  commodities  in  a  quantity  in  excess  of  the 
reasonable  requirements  of  his  business  for  use  or 
sale  by  him  during  the  period  of  sixty  days,"  or  to 
"sell  or  deliver  to  any  person  any  food  commodities 
if  the  licensee  knows,  or  has  reason  to  believe,  that 
such  a  sale  or  delivery  will  give  to  such  person 
a  supply  ...  in  excess  of  his  reasonable  require- 
ments for  use  or  for  sale  by  him  during  the  period 
of  sixty  days  next  succeeding  such  sale  or  delivery."  ^ 
With  some  commodities  the  limit  was  thirty  days' 
supply.  Exceptions  were  made  of  sales  to  the 
United  States  and  the  Allies,  of  commodities  used 
for  seed  purposes,  and  of  certain  commodities  which, 
at  certain  seasons  of  the  year,  existed  in  consider- 
able abundance,  such  as  fruits,  vegetables,  eggs, 
poultry  and  dairy  products.  No  licensee  was  pro- 
hibited from  having  on  hand  less  than  a  carload  of 
any  commodity,  in  addition  to  a  carload  in  transit. 
This  rule  has  been  changed  from  time  to  time  to 
meet  new  emergencies.^ 

The  standardization  of  certain  bakery  products 
was  announced  November  11,  after  an  investigation 

»  0.  B.,  Oct.  31,  1917,  p.  1.  2  Ibid. 


WAR  CONTROL  45 

by  the  Federal  Trade  Commission,  representatives 
of  the  Department  of  Agriculture  and  of  the  Food 
Administration.  The  purpose  of  this  new  measure 
was  to  reduce  the  cost  of  public  baking  and  dis- 
tributing of  bread,  to  reduce  the  waste  of  flour, 
and  to  conserve  the  use  of  sugar  and  lard.  The 
study  of  the  Trade  Commission  made  clear  that 
manufacturers  producing  the  largest  number  of 
sizes  incurred  the  highest  cost,  that  the  large  loaves 
were  more  economical  than  the  small,  that  the 
flavor  and  keeping  qualities  were  better,  and  that 
the  fermentation  losses  were  less  with  large  than 
with  small  loaves.  According  to  the  new  rules, 
licensees  were  required  to  produce  loaves  of  given 
standard  sizes,  and  were  instructed  to  use  flour, 
meal,  milk,  lard,  and  shortening  in  certain  propor- 
tions. Destruction  of  bakery  products,  wilful  waste, 
the  acceptance  of  returned  bread,  and  the  perform- 
ance of  anything  which  would  circumvent  the  rules 
were  proscribed.^ 

In  the  development  of  the  price  policy,  the  method 
followed  by  the  Food  Administration  has  been  to 
reach  the  price  through  profits  and  middlemen's 
charges,  rather  than  to  fix  prices  directly.  Indeed, 
to  quote  Mr.  Hoover:  "The  food  bill  contains  no 
price-fixing  powers,  and  no  price-fixing  in  a  legal 
sense  has  been  attempted,  and  there  has  been  no 
restraint  on  competition  below  the  profiteering 
level."  ^     However,  section  5  of  the  food  act  pro- 

1  O.  B.,  Nov.  12,  1917,  pp.  1,  6;   Nov.  16,  p.  8. 

2  Ibid.,  Dec.  27,  1917,  p.  7. 


46  PROBLEMS  OF  RECONSTRUCTION 

vides  tKat  "the  President  may,  in  lieu  of  any  such 
unjust,  unreasonable,  discriminatory,  and  unfair 
storage  charge,  commission,  profit,  or  practice, 
find  what  is  a  just,  reasonable,  non-discrimi- 
natory and  fair  storage  charge,  commission,  profit, 
or  practice,  and  in  any  proceeding  brought  in  any 
court  such  order  of  the  President  shall  be  prima 
facie  evidence."  ^  Under  the  authority  of  this 
section,  the  President  issued  the  proclamation  of 
November  27,  1917,  authorizing  the  Food  Ad- 
ministrator "to  find  that  a  just,  reasonable,  and 
fair  profit  is  the  normal  average  profit  which  per- 
sons engaged  in  the  same  business  and  place  ob- 
tained prior  to  July  1,  1914,  under  free  competitive 
conditions;  to  indicate,  if  he  shall  see  fit  to  do  so, 
what  margin  over  cost  will  return  such  a  just, 
reasonable,  and  fair  profit;  and  to  take  such  legal 
steps  as  are  authorized  by  said  act  to  prohibit  the 
taking  of  any  greater  profit."  ^ 

In  order  to  enforce  these  regulations  it  has  been 
found  necessary  to  eliminate  certain  trade  methods 
which  might  affect  costs  and  prices,  hence  the  rules 
against  unnecessary  transactions,  resales  within  the 
trade  save  for  justifiable  reasons,  and  the  policy  of 
keeping  goods  moving  on  a  direct  line  to  the  con- 
sumer ;  thereby  unnecessary  charges  are  prevented 
and  chances  of  deception  reduced. 

The  adoption  of  the  price  policy  named  above 
has  made  radical  changes  in  the  peace-time  methods. 
Producers  of  specified  articles  can  no  longer  take 

1  Public  No.  41,  pp.  2  and  3.  «  O.  B..  Nov.  30,  1917,  p.  1. 


WAR  CONTROL  47 

advantage  of  market  changes  to  alter  the  price  of 
these  goods ;  for,  according  to  the  rules,  the  prices 
must  be  based  on  the  profit  margin  and  not  on  market 
or  replacement  value.  This  principle  was  applied 
in  an  order  effective  November  1,  1917,  which  in- 
cluded beef,  mutton,  pork,  sirups,  molasses,  cleaned 
rice  and  rice  flour,  lard  and  lard  substitutes,  various 
canned  goods  and  other  commodities.  Thus,  the 
order  prescribed  that  wholesaler's  profits  for  the 
given  articles  are  to  be  governed  "by  the  price  he 
actually  pays  for  the  goods  he  sells,  and  not  by  the 
prevailing  market  conditions."  ^  Such  regulations 
have  been  rapidly  extended  until  they  cover  the 
principal  producers  and  distributors  of  "neces- 
saries." According  to  the  new  rules  effective  March 
2,  1918,  original  storers  of  poultry  in  cold  storage 
warehouses  are  allowed  an  advance  over  cost  not 
to  exceed  6  per  cent;  a  commission  merchant 
selling  frozen  poultry  for  an  original  storer  may 
receive  a  commission  not  exceeding  5  per  cent  on 
the  cost  of  the  poultry;  and  a  wholesaler,  jobber, 
and  supplier  of  hotels  and  institutions  may  receive 
an  advance  over  cost  to  each  dealer  of  5  per  cent,  10 
per  cent,  and  15  per  cent  respectively.  A  similar 
arrangement  was  made  with  regard  to  eggs.^  In 
case  of  producers  of  canned  goods,  the  producer  was 
allowed  a  maximum  margin  between  cost  and  sell- 
ing price;  this  depended  on  the  article  and  the 
grade.  For  example,  for  corn,  "No.  2,  standard," 
the  margin  was  19  cents  per  dozen ;  for  "No.  2,  extra 

» 0.  B.,  Oct.  29,  1917,  p.  3.  *  Ibid..  March  2,  1918,  p.  2. 


48  PROBLEMS  OF  RECONSTRUCTION^ 

standard,"  22  cents;  for  "No.  2,  fancy,"  30  cents; 
and  a  similar  arrangement  for  peas  and  tomatoes.^ 
These  margins  were  based  on  a  study  by  the  Fed- 
eral Trade  Commission.  In  many  cases  profit 
margins  for  commodities  have  been  arranged  after 
conference  with  the  industries  in  question. ^ 

In  the  case  of  flour  and  feed,  the  Food  Adminis- 
tration stated  from  time  to  time  the  prices  for  va- 
rious localities  it  regards  as  "fair."  According  to 
the  original  regulations,  millers  were  allowed  a 
maximum  gross  margin  of  25  cents  a  barrel,  based 
on  their  annual  business.  The  figuration  of  this 
margin  encounters  considerable  difficulty  because  of 
the  seasonable  nature  of  the  business ;  but  by  a 
recent  ruling,  millers  who  find  themselves  with  an 
excess  over  the  25  cents  at  the  end  of  the  fiscal  year 
may  release  themselves  from  the  difficulty  by  sell- 
ing a  sufficient  amount  to  the  Food  Administration 
or  to  the  Army  and  the  Navy  to  liquidate  the  sur- 
plus. The  accounts  of  millers  are  audited  by  the 
Enforcement  Division  of  the  Food  Administration.^ 
Some  difficulties  have  arisen,  also,  as  to  what  ele- 
ments should  enter  into  cost  for  the  purpose  of  fig- 
uring profits ;  the  question  is  largely  whether  ex- 
cess profits  taxes  should  be  included.  According  to 
a  decision  sent  to  millers  June  17,  neither  excess 
profit  nor  income  taxes  may  be  added. 

'  O.  B.,  April  26,  1918,  p.  4. 

^  Ibid.,  Sept.  13,  1917,"p.  1;  Sept.  18,  p.  3;  Sept.  20,  p.  6;  Sept.  21. 
n.  1;  Sept.  2G,  p.  1 ;  Oct.  22,  p.  6;  Oct.  25,  p.  7;  March  2,  1918,  p.  2; 
March  18,  p.  1 ;   April  18,  p.  8;   April  26,  p.  4;   June  6,  p.  10. 

8  0.  B.,  July  13,  1918,  p.  11. 


WAR  CONTROL  49 

Profit  margins  discussed  above  refer  to  manu- 
facturers, jobbers,  brokers,  etc.  Recently,  the  Food 
Administration  has  announced  a  plan  by  which  re- 
tailers, also,  are  to  be  brought  within  the  scope  of 
price  regulation.  The  plan  is  to  establish  "fair 
price  lists"  to  be  published  in  practically  every 
locality  in  the  country.  These  lists  are  to  be  con- 
structed by  committees  composed  of  representatives 
of  wholesalers,  retailers,  and  consumers.  Each  com- 
mittee is  to  have  detailed  reports  of  actual  whole- 
sale prices,  and  with  the  aid  of  these  will  ascertain 
the  fair  margins  for  retailers.  By  this  plan,  there- 
fore, prices  to  consumers  will  represent  cost  of 
acquisition  plus  a  reasonable  charge  for  handling 
and  a  fair  profit.^ 

It  was  said  above  ^  that  one  of  the  characteristics 
of  the  food  program  was  the  method  of  solving  the 
wheat  and  sugar  problems.  Wheat  was  selected 
for  special  treatment  by  the  Food  Administration 
partly  because  it  was  so  designated  by  the  Food 
Act,  and  partly  because  it  is  one  of  the  most  im- 
portant articles  of  consumption.  It  was  deemed 
especially  important  both  to  stimulate  production 
and  to  provide  consumers  with  wheat  products  at 
as  low  a  price  as  possible.  The  shortage  of  the 
domestic  supply,  difficulties  in  obtaining  wheat 
from  the  customary  world  sources,  shipping  trou- 
bles, the  growing  dependence  of  the  Allies  on  the 
United  States,  and  the  home  demands  for  the 
elimination   of  speculation,  were   other   factors   in- 

»  O.  B.,  June  8,  1918,  p.  1.  «  Cf.  ante.  p.  38. 


50  PROBLEMS  OF  RECONSTRUCTION 

volved.  Said  the  President  in  his  proclamation  of 
August  30,  1917,  fixing  the  price  of  wheat:  "The 
Food  Act  has  given  large  powers  for  the  control  of 
storage  and  exchange  operations,  and  these  powers 
will  be  fully  exercised.  An  inevitable  consequence 
will  be  that  financial  dealings  cannot  follow  their 
usual  course.  Whatever  the  advantages  and  dis- 
advantages of  the  ordinary  machinery  of  trade,  it 
cannot  function  well  under  such  disturbed  and 
abnormal  conditions."  ^ 

The  committee  appointed  by  the  President  to  as- 
certain a  fair  price  for  wheat  for  Government  pur- 
chases reported  August  30,  recommending  $2.20  a 
bushel  at  Chicago  for  number  one  northern  spring 
wheat  or  its  equivalent.  A  differential  was  stated 
for  the  various  markets.  For  Kansas  City,  for 
example,  it  was  5  cents  less ;  for  Duluth  and  Min- 
neapolis, 3  cents  less ;  for  St.  Louis,  2  cents  less ; 
for  Buffalo,  2  cents  more,  and  for  New  York,  10 
cents  more.^  The  determination  of  a  price  for  wheat 
which  is  produced  under  a  great  variety  of  costs 
was  no  easy  matter.  In  solving  the  problem,  how- 
ever, the  committee  was  guided  by  the  principle 
that  a  "fair  price  should  be  based  on  the  cost  of 
production  for  the  entire  country,  plus  a  reasonable 
profit."  In  arriving  at  costs,  they  relied  on  esti- 
mates for  the  crop  of  1917  submitted  by  the  De- 
partment of  Agriculture,  checked  by  independent 
investigation,  and  by  evidence  submitted  by  the 
producers  and  their  representatives. 

1  O.  B.,  Aug.  31,  1917,  p.  1.  2  7j^,  pp,  j  and  2. 


WAR  CONTROL  51 

The  Food  Act  not  only  authorizes  the  President 
to  purchase  wheat  for  government  account,  but  to 
guarantee  the  price  for  prospective  crops. ^  In  ac- 
cordance with  this  provision,  on  February  21,  a 
proclamation  was  issued  guaranteeing  the  price 
for  the  1918  harvest  at  essentially  the  price  named 
for  government  purchases,  with  slight  changes  due 
to  the  designation  of  additional  terminal  markets. ^ 
Owing  to  the  recent  establishment  of  new  freight 
rates  by  the  Railroad  Administration,  it  has  been 
found  necessary  to  raise  the  guaranteed  price.  The 
new  price  in  Chicago,  effective  July  1,  is  $2.26.^ 

Congress  has  changed  its  attitude  in  the  method 
of  guaranteeing  the  price  of  wheat.  In  a  recent 
agricultural  appropriation  bill,  it  attempted  to  take 
this  power  out  of  the  hands  of  the  President,  and 
fix  the  guaranteed  price  by  statute.  Section  14  of 
the  act  prescribed  a  uniform  minimum  price  for 
number  two  northern  spring  wheat  of  $2.40  a  bushel.^ 
The  President  promptly  vetoed  the  measure,  urging 
that  the  administrative  method  of  agreeing  upon  a 
fair  price  "has  this  very  great  advantage,  which  any 
element  of  rigidity  would  in  a  large  measure  destroy, 
namely,  the  advantage  of  flexibility,  of  rendering  pos- 
sible at  every  stage  and  in  view  of  every  change  of 
experience  a  readjustment  which  will  be  fair  alike 
to  producer  and  consumer."  ^  He  also  urged  that 
the  proposed  price  would  add  upwards  of  $2.00  a 

1  Cf.  sections  11  and  14.  2  q.  B.,  Feb.  25,  1918,  p.  1. 

'  Ibid.,  July  2,  1918,  p.  G.  *  Cf.  H.  R.  9054. 

6  0.  B.,  July  13,  1918,  p.  5. 


52  PROBLEMS  OF  RECONSTRUCTION 

barrel  for  flour,  that  it  would  force  a  corresponding 
increase  in  the  price  of  Canadian  wheat,  and  that 
the  objections  to  the  present  price  came  mainly 
from  sections  of  the  country  "where,  unfortunately, 
it  has  in  recent  years  proved  impossible  to  depend 
on  climatic  conditions  to  produce  a  full  crop  of 
wheat  and  where,  therefore,  many  disappointments 
to  the  farmer  have  proved  unavoidable."  ^ 

The  arrangements  for  wheat  in  the  food  act  made 
necessary  the  creation  of  a  new  government  organ- 
ization. For  two  reasons  machinery  had  to  be  de- 
vised for  government  purchase :  to  obtain  wheat 
on  government  account  and  to  maintain  the  guar- 
anteed minimum  price.  To  effect  the  latter,  it 
was  necessary  for  the  Government  to  enter  the 
market  and  accept  wheat  at  the  guaranteed  amount. 
Following  the  precedent  of  the  Emergency  Shipping 
Corporation,  the  President,  by  executive  order  of 
August  14,  1917,  authorized  the  creation  of  the 
Food  Administration  Grain  Corporation  with  a 
capital  of  $50,000,000,  all  of  which  was  owned  by 
the  Government.  A  wheat-purchasing  division  and 
auditing  division  were  also  created,  and  represent- 
atives were  appointed  resident  in  the  various 
markets  to  administer  the  provisions  of  the  new 
order. ^  Even  this  large  amount  proved  inadequate 
for  the  purposes  of  the  act ;  by  another  executive 
order,  dated  June  21,  1918,  the  capital  was  in- 
creased to  $150,000,000  and  the  Food  Administra- 
tion  was   directed  to  subscribe  for  the  additional 

1  0.  B.,  July  13,  1918,  p.  5.  « Ibid.,  Aug.  16,  1917,  p.  3. 


WAR  CONTROL  53 

stock  in  the  name  of  the  United  States  and  to  pay 
for  same  out  of  the  funds  appropriated  by  section 
19  of  the  Food  Act.^  The  corporation  is  authorized 
to  purchase  at  the  guaranteed  price  all  wheat  offered 
by  any  producer  at  any  primary  market  named  in 
the  proclamation  of  February  21.  Remittances 
are  made  at  the  government  price  less  one  per  cent 
to  cover  administration  expenses  on  the  basis  of 
reported  weights  and  grades.  Thus  a  farmer  may 
sell  either  to  the  grain  corporation  or  to  a  com- 
mission merchant.  Country  elevators  and  buyers 
are  entitled  to  receive  fair  compensation  for  their 
services  in  handling  and  marketing  of  grain,  and 
the  charges  for  such  service  are  a  necessary  de- 
duction from  the  price  of  the  wheat. ^ 

The  sugar  problem  is  also  encumbered  with 
peculiar  difficulties.  Unlike  wheat,  most  of  the 
raw  sugar  comes  from  outside  producers.  Com- 
petition between  the  United  States  and  foreign 
countries  for  the  limited  supply,  and  the  need  of 
adjusting  differences  between  beet  and  cane  pro- 
ducers, further  complicate  the  problem.^  On  Aug- 
ust 27  an  embargo  was  placed  on  the  export  of  all 
sugar  from  this  country.  The  Cuban  Government 
promptly  cooperated  by  embargoing  sugar  except 
to  the  United  States  and  the  Allies.^  Meanwhile, 
by  a  proclamation  of  September  7,  effective  October 
1,  importers,  manufacturers,  and  refiners  of  sugar, 

1  O.  B.,  June  24,  1918,  p.  1 ;  June  25,  1918,  p.  1. 

*  Ibid.,  July  16,  1918,  p.  12. 

3  Ibid.,  Sept.  29,  1917,  p.  1 ;  Dec.  17,  1917,  p.  6.  *  Ibid. 


54  PROBLEMS  OF  RECONSTRUCTION 

sugar  sirups,  and  molasses  were  put  under  license.^ 
The  purpose  of  this  was  to  regulate  prices,  secure 
equitable  distribution,  and  prevent  speculation. 
An  international  sugar  committee  of  five  members 
was  formed  to  arrange  for  the  purchase  and  dis- 
tribution of  the  product  whether  for  consumption 
in  the  United  States  or  foreign  countries.  The  plan, 
also,  included  an  agreement  on  the  part  of  the  re- 
finers to  obtain  raw  sugar  under  the  direction  of 
the  International  Sugar  Committee  and  to  work  out 
a  margin  between  the  cost  of  the  raw  product  and 
the  selling  price  of  refined.  A  committee  was  also 
appointed  to  superintend  the  distribution  of  beet 
sugar. ^  Meanwhile,  about  September  29,  the  Food 
Administration  announced  its  intention  of  enter- 
ing into  negotiations  with  Cuban  planters  for  the 
purpose  of  fixing  a  price  in  New  York  which  would 
be  satisfactory  to  the  producer  and  reasonable  for 
the  American  consumer.^ 

In  the  latter  part  of  December,  Mr.  Hoover  out- 
lined the  steps  taken  to  solve  the  sugar  problem. 
Suspension  of  speculation  in  futures  was  effected 
largely  through  voluntary  arrangement  between  the 
administration  and  producers  and  distributors.  An 
agreement  was  also  made  with  beet  sugar  pro- 
ducers by  which  the  price  was  fixed  at  $7.25  and 
provision  made  for  an  equitable  distribution  of  the 
supply.  Refiners  of  California  and  Hawaii  agreed 
to  maintain  the  beet  basis  in  spite  of  the  higher  price 

1  With  certain  exceptions.     Cf.  O.  B.,  Sept.  15,  1917,  p.  2. 

8  O.  B.,  Sept.  29,  1917,  p.  3.  3  Ibid.,  Sept.  29,  1917,  p.  1. 


WAR  CONTROL  55 

in  the  East  for  cane  sugar.  Louisiana  producers 
agreed  to  limit  the  price  to  $7.80  for  granulated. 
Other  measures  were  the  limitation  of  profits  of 
refiners,  wholesalers,  and  jobbers,  a  widespread 
propaganda  informing  the  public  of  the  maximum 
price  they  should  pay  retailers,  and  a  ruling  that  re- 
tailers charging  exorbitant  prices  would  have  their 
supply  cut  off.^ 

Other  problems  remained  for  solution.  To  pre- 
vent injustice  to  refiners,  it  was  necessary  to  divide 
the  imported  sugar  among  the  various  factories 
pro  rata  to  their  capacities.  A  committee  of  the 
principal  producers  was  appointed  for  this  purpose. 
It  was  necessary,  also,  to  save  shipping,  to  deter- 
mine the  most  economical  sources  from  the  trans- 
port point  of  view  of  all  the  Allies,  to  arrange  trans- 
port at  uniform  rates,  and  to  secure  an  equitable 
distribution  of  sugar  among  the  Allies  and  the 
United  States.  This  matter  was  put  in  the  hands 
of  a  committee  composed  of  three  representatives  of 
the  French,  English,  and  Italian  governments,  two 
representatives  of  American  refiners,  and  a  member 
of  the  Food  Administration. 

By  recent  measures,  the  Food  Administration 
proposed  to  reduce  the  price  of  sugar  to  the  ultimate 
consumer  and  to  obtain  a  better  distribution  of  the 
product  throughout  the  country.  On  July  11,  1918, 
the  President  created  the  Sugar  Equalization  Board, 
whose  function  is  partly  to  accomplish  the  purpose 

10.  B.,  Dec.  27,  1917,  pp.  7,  8;  Com.  and  Fin.  Chron.,  Dec.  15, 
1917,  p.  2325. 


66         PROBLEMS  OF  RECONSTRUCTION 

just  named,  and  partly  to  facilitate  joint  dealings 
with  the  Allies  in  foreign  sugars  and  to  adjust  dif- 
ferentials in  oversea  freight  rates.  Where  pro- 
ducers, notably  of  beet  sugar,  cannot  afford  to  sell 
at  the  agreed  profit  margin,  the  board,  under  cer- 
tain conditions,  may  purchase  the  output  at  a  price 
which  will  enable  such  plants  to  continue  in  business. 
The  plan  includes  the  incorporation  of  the  board 
for  upwards  of  $5,000,000,  which  sum  will  be  sup- 
plied by  the  President  from  his  special  funds,  and 
the  stock  will  be  held  by  the  President  for  the  United 
States.  The  purpose  of  this  arrangement  is  "to 
absorb  the  high  peaks  of  cost  in  sugar  production 
and  to  make  a  small  margin  on  the  low  cost  of 
certain  foreign  sugars  which  may  be  purchased  and 
thus  secure  an  equalization  of  the  price  to  the 
public  on  a  lower  level  than  will  otherwise  be  pos- 
sible." ^  By  this  method  it  is  hoped  "to  work  out 
a  price  for  the  public  upwards  of  one  cent  per  pound 
less  than  would  be  the  case  if  the  price  of  sugar 
were  advanced  to  a  price  that  will  cover  the  high 
peaks  in  costs  from  all  quarters."  Apparently, 
the  Government  is  to  buy  sugar  to  protect  some  of 
the  high-cost  producers  who  would  be  forced  out 
of  business  at  the  prevailing  profit  margin,  and  will 
recoup  the  loss  by  purchases  of  the  low-cost  product. 
This  plan,  therefore,  differs  materially  from  the 
method  of  meeting  the  wheat  problem  where  the 
guaranteed  price  is  supposed  to  cover  a  fair  margin 
of  profit  "for  the  country  as  a  whole,"  which   in- 

1  O.  B.,  July  12,  1918,  p.  1 ;   Bus.  Dig.,  July  24,  1918,  p.  140. 


WAR  CONTROL  57 

terpreted  means  that  this  price  covers  the  expenses 
of  those  farmers  whose  costs  are  highest. 

Owing  to  the  increasing  shortage  of  sugar,  it  be- 
came necessary  late  in  the  spring  of  1918  to  plan 
rigid  conservation  of  the  supply.  The  essential 
features  of  the  order  effective  May  15  were  the 
restriction  of  producers  of  less  essentials  to  80  per 
cent  of  their  1917  demands,  and  the  cutting  off  en- 
tirely of  supplies  from  producers  of  noti-edible  prod- 
ucts, except  that  the  necessary  manufactures  of  this 
class  received  their  requirements.  Firms  which  en- 
tered business  after  April  1,  1918,  were  to  receive 
no  sugar,  and  those  which  increased  their  demands 
since  that  date  were  denied  further  supply  until 
their  stock  was  exhausted.  Producers  of  ice  cream 
and  tobacco  were  put  in  a  preferred  class.  In  case 
of  the  former,  it  was  deemed  necessary  to  assure  the 
consumption  of  the  surplus  of  milk  to  encourage  the 
dairy  interest  to  maintain  production.  The  con- 
sumption of  sugar  in  the  production  of  tobacco  was 
regarded  as  a  negligible  quantity.^ 

Nor  did  conservation  measures  stop  here.  The 
lack  of  shipping,  and  the  decrease  in  the  amount  of 
raw  sugar  from  Cuba,  compelled  a  further  cut. 
A  new  order,  effective  July  1,  divided  consumers 
into  groups.  In  group  A,  candy  producers  were 
limited  to  50  per  cent  of  their  average  consumption 
for  the  three  months  ending  with  September  1917 ; 
ice  cream  makers  were  entitled  to  75  per  cent.  In 
group  B,  commercial  canners  were  given  their  full 

1  Bus.  Dig.,  May  15,  1918,  p.  655 ;  O.  B.,  May  6,  1918,  p.  1. 


58  PROBLEMS  OF  RECONSTRUCTION 

requirements  ;  in  group  C,  public  eating  places  were 
rationed  on  the  basis  of  three  pounds  for  each  ninety 
meals  served.  Bakers,  in  group  D,  were  entitled  to 
70  per  cent  of  their  average  consumption  for  the 
three  months  ending  September  1917,  or  as  an  al- 
ternative, 70  per  cent  of  their  consumption  for 
June  1918;  group  E,  —  that  is,  retail  stores, — re- 
ceived for  July  a  supply  equivalent  to  the  average 
amount  sold  during  the  three  months  ending  June 
1918.  They  were  forbidden  to  sell  to  others  than 
householders  without  taking  up  the  certificates  of 
such  persons.  Nor  could  they  sell  more  than  two 
pounds  at  any  one  time  to  town  consumers,  and 
not  more  than  five  pounds  to  country  consumers. 
Exception  was  made  in  the  case  of  sugar  for  home 
canning,  when  twenty-five  pounds  could  be  obtained, 
or  even  a  larger  amount  with  the  approval  of  the 
local  food  administrator.  Consumers  were  required 
to  certify  that  the  product  was  used  for  canning, 
that  they  had  not  purchased  elsewhere ;  mean- 
while, they  promised  to  return  any  unused  portion.^ 

As  with  the  order  effective  May  15,  certificates 
were  required  of  distributors;  in  case  of  the  new 
order,  records  were  kept  by  the  retailers  of  house- 
hold purchases.  Administration  of  the  order  was  in 
the  hands  of  local  food  authorities. 

Apparently,  in  putting  out  the  order  effective  July 
1,  the  Food  Administration  was  not  able  to  foresee 
the  extent  of  the  prospective  shortage.  New  fac- 
tors  necessitated  greater   economy.     Among  these 

1  Bus.  Dig.,  July  3,  1918,  p.  30;  0.  B.,  June  24,  1918,  p.  6. 


WAR  CONTROL  59 

were  the  unexpected  loss  of  upwards  of  fifty  mil- 
lion pounds  of  sugar  through  submarine  activity 
off  the  Atlantic  coast,  the  larger  demands  of  the 
army  and  navy,  and  the  unfavorable  outlook  for 
production  from  American  beet  and  cane.  In  ad- 
dition the  United  States  was  under  obligatiori  to  sup- 
ply sugar  to  certain  neutrals  under  its  agreements. 
Thus  it  was  found  necessary  to  further  restrict 
domestic  consumption,  during  the  period  from 
August  1  to  January  1,  to  two  pounds  per  person 
a  month.  An  order  issued  to  public  eating  places 
limited  the  use  of  sugar  to  two  pounds  for  each 
ninety  meals  served.^ 

A  new  feature  in  meeting  the  sugar  problem  was 
the  appointment,  June  25,  of  a  sugar  administrator 
with  entire  control  over  distribution.  One  of  his 
chief  functions  was  to  devise  economies  and  con- 
serve supply.  A  part  of  the  new  plan  was  to  or- 
ganize production  districts  within  the  country,  to 
eliminate  cross  hauling,  and  to  effect  a  zone  system 
comparable  to  that  in  operation  for  the  distribution 
of  coal. 2 

The  general  principles  of  control,  outlined  above, 
are  witnessed  also  in  dealing  with  the  meat  and 
coffee  situation.  On  September  12,  1917,  a  packer's 
committee,  representing  the  several  classes  of  pro- 
ducers, approved  the  licensing  of  the  industry.^ 
The  intention  of  the  Food  Administration  to  limit 

1  O.  B.,  July  26,  1918,  p.  5. 

»  Bus.  Dig..  July  3.  1918,  p.  30;  July  26,  1918,  pp.  5  and  7. 

»  0.  B.,  Sept.  13,  1917,  p.  1. 


60  PROBLEMS  OF  RECONSTRUCTION 

profits  of  the  packers  was  made  known  November 
24,  when  it  was  announced  that  producers  would 
be  divided  into  two  classes,  namely,  those  with  an 
annual  business  over  $100,000,000  a  year  and  those 
under  that  amount.  For  the  first  class,  profits 
were  limited  to  9  per  cent  on  their  investment,  ex- 
cept on  by-products.  Smaller  packers  were  al- 
lowed 2^  per  cent  on  the  gross  value  of  their  sales. 
For  purposes  of  profit  regulation,  packers  of  the 
first  group  were  required  to  divide  their  business 
into  three  classes.  On  class  1  the  annual  profits 
were  not  to  exceed  9  per  cent ;  nor  could  they  ex- 
ceed 2i  per  cent  on  gross  sales.  This  class  included 
slaughtering,  other  food  products  of  which  at  least 
one  fourth  consisted  of  material  from  slaughtered 
live  stock,  non-edible  products,  including  hides, 
wool,  and  goats'  hair,  and  the  operation  of  refriger- 
ator cars.  On  class  2  a  profit  of  15  per  cent  was 
permitted ;  included  in  this  group  were  soaps, 
cleansing  materials,  glue,  gelatine,  glycerine,  am- 
monia, pharmaceutical  products,  leather,  commer- 
cial fertilizers,  and  products  of  horn  and  bone. 
No  limitation  was  imposed  on  profits  derived  from 
class  3,  which  included  the  raising,  feeding,  and 
fattening  of  live  stock,  slaughtering  and  manufac- 
turing products  in  foreign  countries,  the  operation 
of  stock  yards,  loan  agencies  and  institutions,  and 
any  other  business  outside  the  scope  of  classes  one 
and  two.^ 

1  Com.  and  Fin.  Chron.,  Dec.  15.  1917,  p.  2325 ;  Bus.  Dig.,  Dec.  5, 
1917,  p.  447;  Dec.  12,  1917,  p.  489. 


WAR  CONTROL  61 

The  announcement  that  profits  were  to  be  limited 
brought  a  protest  from  the  packers  who  urged  that 
9  per  cent  might  restrict  their  borrowing  capacity, 
that  it  did  not  yield  enough  to  finance  expansions 
of  plant  and  equipment,  and  that  new  capital  could 
not  be  found  for  these  purposes  during  the  war.  Mr. 
Hoover  replied  that  investigation  showed  that  pre- 
war earnings  were  slightly  less  than  9  per  cent,  and 
that  insistence  on  more  than  that  amount  prac- 
tically meant  a  demand  on  consumers  to  pay  for 
plant  extensions.  He  urged,  also,  that  "if  the 
packers  exhausted  their  abilities  to  find  capital  for 
construction  out  of  their  earnings,  and  that  if  the 
Government  required  specific  extensions  of  plant 
to  meet  war  needs,  these  would  be  considered 
upon  their  merits  from  time  to  time."  ^  As  in 
the  case  of  other  industries  covered  by  the  Food 
Act,  packers  were  put  under  license  and  were  for- 
bidden to  make  any  change  in  their  business 
which  might  raise  the  rate  of  profit  above  the 
amounts  stated. 

With  the  meat  industry,  as  with  others,  new  con- 
ditions were  continually  arising  to  complicate  the 
problems  and  to  enhance  the  diflSculties  of  control. 
The  former  methods  had  not  measured  up  to  re- 
quirements and  a  change  was  found  necessary. 
Thus,  said  Mr.  Hoover,  in  a  letter  to  the  President 
dated  March  26,  1918  :  "I  feel  that  we  have  reached 
a  position  with  regard  to  the  whole  meat  industry 
of  the  country  that  requires  a  reconsideration  of 

1  O.  B.,  April  1.  1918,  pp.  1,  6. 


62         PROBLEMS  OF  RECONSTRUCTION 

policy.  The  situation  is  one  of  the  most  complex 
with  which  the  Government  has  to  deal,  by  virtue 
of  the  increasing  influence  that  the  Government 
purchasing  has  upon  prices,  by  the  necessity  of  pro- 
viding increasing  supplies  for  the  Allies,  and  the 
consequent  reduction  of  civilian  consumption  and 
withal,  the  due  protection  of  the  producer  and  the 
civilian  consumer."  Elsewhere  Mr.  Hoover  said : 
*'I  recognize  fully  the  well-founded  objection  to 
any  theory  of  price  fixing,  but  where  the  purchases 
of  war  necessities  in  a  given  commodity  have  reached 
such  a  volume  that  the  purchase  of  these  commod- 
ities trench  into  the  domestic  consumption,  the 
operation  of  this  purchasing  power  becomes  a  con- 
dition of  price  fixing  and,  to  my  mind,  all  theories 
go  by  the  board." 

He  suggested  three  possible  policies.  First:  "To 
free  the  Government  from  all  interest  in  price  by 
abandoning  direction  of  war  purchases  and  to  aban- 
don conservation  measures  because  they  may  also 
affect  price."  This  policy  was  rejected  because 
"with  growing  volume  of  purchases  the  price  in- 
fluence will  be  transferred  to  uncontrolled  agencies 
who  are  themselves  price  fixing.  .  .  ."  Second : 
"To  continue  as  at  present  the  direction  of  these 
large  purchases  with  a  mixture  of  partial  national 
policy  in  production  and  day-to-day  dealing  with 
emergency."  This  method  was  also  rejected  be- 
cause of  the  "intolerable  situation  for  any  govern- 
ment official  in  criticism  from  both  producer  and 
consumer,   and  with  the  growing  volume  of  pur- 


WAR  CONTROL  6S 

chases  this  criticism  must  increase.     It  permits  of 
no  constructive  policy  in  production."  ^ 

The  third  policy  suggested  was  "to  stabilize 
prices  based  upon  cost  of  production  at  a  fair  and 
stimulative  profit  to  the  producer  and  with  stabil- 
ization to  eliminate  speculative  risks  and  wasteful 
practices  and  thus  some  gains  for  the  consumer." 
With  reference  to  this  plan  Mr.  Hoover  said :  "This 
course  is  also  fraught  with  dangers.  It  leads  either 
to  a  voluntary  agreement  with  the  packers  as  to 
prices  to  be  paid  producers  and  charged  to  con- 
sumers from  time  to  time  or  to  actual  operation  of 
the  packing  plants  by  the  Government.  In  either 
case  the  Government  will  need  to  take  some  finan- 
cial responsibility  in  speculative  business."  In  con- 
clusion, he  compared  the  purchases  of  meat  prod- 
ucts with  those  of  iron,  steel,  copper,  explosives, 
wheat,  sugar,  and  some  other  commodities.  "None 
of  these  arrangements  have  evolved  out  of  any 
governmental  policy  of  price-fixing,"  said  Mr. 
Hoover,  "or  any  desire  to  interfere  with  the  oper- 
ation of  natural  laws  of  trade,  but  are  simply  the 
result  of  the  Government  being  forced  into  the 
issue  of  becoming  the  dominant  purchaser  and 
thereby,  willingly  or  unwillingly,  the  price  deter- 
miner in  particular  commodities."  ^  He  recom- 
mended a  board  to  study  the  problem  composed  of 
the  following  or  their  representatives :    the   Secre- 

»  0.  B.,  April  1,  1918,  p.  6. 

'  Cf.  supra.  Note  that  this  policy  is  recommended  only  as  a  war 
measure. 


64  PROBLEMS  OF  RECONSTRUCTION 

tary  of  Agriculture,  the  chairman  of  the  Federal 
Trade  Commission,  the  chairman  of  the  Tariff 
Board,  the  Secretary  of  Labor,  and  the  Food  Ad- 
ministrator.^ 

The  committee  reported  May  27,  1918,  recom- 
mending the  continuation  of  the  regulation  of  the 
packing  industry  by  the  Food  Administration  and 
against  government  operation  "unless  it  should  be 
found  impossible  to  enforce  regulatory  measures."  ^ 
Other  recommendations  included  the  auditing  of 
packers'  bi-monthly  profit  statements,  extending 
the  existing  methods  of  regulating  profits  until 
July  1,  a  study  and  report  by  the  Federal  Trade 
Commission  of  reasonable  margins,  report  by  the 
packers  of  wholesale  prices  received  for  meat,  and 
local  publicity  for  such  prices.  As  to  retail  distri- 
bution, it  was  urged  that  an  investigation  should 
be  made  for  the  purpose  of  determining  "some 
constructive  effort,"  and  it  was  suggested  that  a 
committee  be  created  for  "thorough  investigation 
of  and  recommendation  upon  the  subject."  ^ 

In  the  light  of  later  developments  it  is  possible  to 
read  between  the  lines  of  Mr.  Hoover's  letter  to  the 
President  and  see  why  satisfactory  regulation  on 
the  existing  basis  was  unsatisfactory.  Apparently, 
there  was  a  feeling  that  profits  were  greater  than 
they  should  be  in  war  times  and  that  fixing  profit 
margins  did  not  solve  the  problem.  In  this  con- 
nection the  packers  have  recently  come  in  for  their 

1  O.  B.,  April  1,  1918,  p.  6.  «  75^,^  May  31,  1918,  p.  1. 

Ubid. 


WAR  CONTROL  65 

share  of  indictment  on  the  charge  of  profiteering. 
According  to  the  report  of  the  Federal  Trade  Com- 
mission directed  to  the  Senate  June  29,  1918  :  "The 
power  of  dominant  factors  in  a  given  industry  in 
maintaining  high  prices  and  harvesting  unprec- 
edented profits  is  shown  in  a  survey  of  the  meat 
packing  situation.  Five  meat  packers,  Armour, 
Swift,  Morris,  Wilson,  and  Cudahy,  and  their  sub- 
sidiary and  afl&liated  companies,  have  monopolistic 
control  of  the  meat  industry  and  are  reaching  for 
like  domination  in  other  products.  Their  manip- 
ulations of  the  market  embrace  every  device  that  is 
useful  to  them,  without  regard  to  law.  Their  re- 
ward, expressed  in  terms  of  profit,  reveals  that  four 
of  these  concerns  have  pocketed  in  1915,  1916,  and 
1917,  $140,000,000.  .  .  .  However  dehcate  a  defi- 
nition is  framed  for  'profiteering,'  these  packers 
have  preyed  upon  the  public  unconscionably."  ^ 
Evidently,  if  the  figures  given  by  the  packers  in 
their  reply  are  true,  the  commission  has  confounded 
"high  prices"  with  "unprecedented  profits";  for 
it  does  not  necessarily  follow  that  prices  are  high  be- 
cause profits  are  great.  In  fact,  the  packers  urged 
in  their  reply  that  their  profit  per  pound  was  only 
a  fractional  part  of  a  cent,  and  that  such  a  small 
margin  on  the  turnover  was  scarcely  felt  in  the 
final  consumer's  price.  The  report  makes  clear 
another  difficulty  inherent  in  all  profit  regulation, 
namely,  the  problem  of  reaching  the  "low-cost 
producers."     Thus,   according  to  the  report,   "the 

1  Senate  Doc.  No.  248,  65th  Cong.,  2d  Sess.,  p.  7. 
F 


66  PROBLEMS  OF  RECONSTRUCTION 

outstanding  revelation  which  accompanies  the  work 
of  cost  finding  is  the  heavy  profit  made  by  the  low- 
cost  concern  under  a  governmental  fixed  price  for 
the  whole  country."  ^  The  commission's  solution 
for  this  diflSculty  is  found  in  the  following  state- 
ment from  the  report :  *'  The  profiteering  that 
cannot  be  got  at  by  the  restraints  of  conscience 
and  the  love  of  country  can  be  got  at  by  taxation." 
Grave  questions  of  economic  policy  are  involved  in 
this  statement,  for  the  question  arises  whether 
regulation  or  heavy  taxation  which  penalizes  efficiency 
in  the  long  run  accomplishes  the  results  of  stimulat- 
ing production  and  disburdening  consumers  of  high 
prices.  It  would  easily  solve  the  problem  of  high 
profits,  but  would  it  at  the  same  time  be  a  cure  for 
high  prices  ? 

The  regulation  of  the  coffee  industry  was  ef- 
fected by  methods  similar  to  those  described  above 
for  other  food  products.  On  February  6,  1918,  fol- 
lowing a  conference  with  the  members  of  the  New 
York  Coffee  and  Sugar  Exchange,  speculation  in 
green  coffee  was  prohibited  by  the  Food  Adminis- 
tration. Actual  dealers  in  green  coffee  beans  were 
prohibited  from  having  on  hand  or  under  control 
in  this  country  supplies  more  than  sufficient  for 
their  90-day  requirements.  The  stocks  permitted 
were  in  addition  to  those  en  route  to  foreign  coun- 
tries, or  held  in  foreign  countries  under  contract. 
Dealers  agreed  to  keep  the  product  moving  in  as 
direct  line  as  possible  to  consumers,  and  to  eliminate 

1  Senate  Doc.  No.  248,  op.  dt.,  pp.  5  and  20. 


WAR  CONTROL  67 

resales  within  the  trade  without  reasonable  justi- 
fication.^ In  addition  to  the  provision  that  licensees 
in  any  sale  of  green  coffee  should  take  no  more  than 
a  reasonable  profit,  the  limit  of  profit  was  fixed. 
A  "reasonable  profit"  for  an  importer  was  an- 
nounced to  be  not  more  than  2^  per  cent,  for  a 
jobber  not  to  exceed  5  per  cent  gross  margin  over 
cost,  plus  brokerage  or  commission  and  the  usual 
ex-ship  or  in  store  and  shipping  charges  actually 
incurred  by  the  licensee.' 

We  said  above  that  one  of  the  features  of  the  food 
plan  was  the  development  of  measures  of  voluntary 
conservation.  Our  interest  is  principally  in  the 
growth  of  control  and  not  in  the  supplementary 
measures.  The  latter,  therefore,  require  only  brief 
discussion.  Voluntary  measures  apply  principally 
to  the  ultimate  consumer,  and  rest  for  their  success 
on  the  manner  in  which  householders  cooperate 
with  the  Food  Administration.  As  Mr.  Hoover 
said:  "The  effectiveness  of  these  rules  is  dependent 
solely  upon  the  good-will  of,  and  the  willingness  to 
sacrifice  by,  the  American  people.  We  are  de- 
pendent upon  the  cooperation  of  the  trades.  We 
have  but  one  police  force  —  the  American  woman 
—  and  we  depend  upon  her  to  organize  in  cooper- 
ation with  our  State  and  local  Food  Administrators 
to  see  that  these  rules  are  obeyed  by  that  small 
minority  who  may  fail."  ^     There  is  an  element  of 

1  O.  B.,  March  7,  1918,  p.  8 ;   March  12,  1918,  p.  3. 

»  Ibid.,  March  12,  1918,  p.  3. 

»  Com.  and  Fin.  Chron.,  Feb.  2.  1918,  p.  443. 


68  PROBLEMS  OF  RECONSTRUCTION 

control,  however,  in  all  these  measures,  as  was 
indicated  above  in  the  case  of  flour  and  sugar. 
But  below  the  minimum  established  by  the  Food 
Administration  there  are  large  savings  that  con- 
sumers may  effect  by  abstinence.  The  purpose  of 
voluntary  measures  is  to  promote  such  economies. 

The  movement  for  meatless  Tuesdays  and  wheat- 
less  Wednesdays  was  started  late  in  September 
1917.  Reports  reaching  Washington  early  in  No- 
vember indicated  that  the  observance  of  such 
measures  was  coming  to  be  general.  "In  New  York 
City,"  it  was  said,  "out  of  225  restaurants  belong- 
ing to  a  certain  association,  224  are  observing  the 
days  for  the  saving  of  these  two  commodities," 
and  "out  of  66  railway  dining  car  services  in  the 
country  47  have  pledged  themselves  to  work  with 
the  Food  Administration  in  having  meatless  and 
wheatless  days."  ^ 

Further  steps  for  the  conservation  of  food  were 
announced  in  the  President's  proclamation  dated 
January  18.  The  President  explained  that  "many 
causes  have  contributed  to  create  the  necessity  for 
a  more  intensive  effort  on  the  part  of  our  people  to 
save  food  in  order  that  we  may  supply  our  associ- 
ates in  the  war  with  the  sustenance  vitally  neces- 
sary to  them  in  these  days  of  privation  and  stress. 
The  reduced  productivity  of  Europe  because  of  the 
large  diversion  of  man  power  to  the  war,  the  partial 
failure  of  harvests,  and  the  elimination  of  the  more 
distant  markets  for  foodstuffs  through  the  destruc- 

1 0.  B.,  Nov.  7,  1918,  p.  4. 


WAR  CONTROL  69 

tion  of  shipping,  places  the  burden  of  their  subsistence 
very  largely  on  our  shoulders."  ^ 

The  proclamation  called  for  a  30  per  cent  re- 
duction in  the  consumption  of  wheat  and  wheat 
products,  and  the  observance  of  two  wheatless 
days,  namely,  Monday  and  Wednesday,  instead 
of  Wednesday  only,  as  heretofore.  In  addition  to 
meatless  Tuesday,  already  in  vogue,  the  public  was 
urged  to  observe  one  meatless  meal  each  day  and 
not  to  consume  pork  on  Tuesdays  and  Saturdays. 
By  "pork"  was  meant  bacon,  ham,  lard,  and  other 
pork  products,  fresh  or  preserved.  According  to  the 
new  rules  issued  by  Mr.  Hoover  about  the  same 
time,  the  new  product,  "Victory  Bread,"  was  to 
contain  not  less  than  5  per  cent  of  cereals  other  than 
wheat  beginning  February  3 ;  the  amount  was  to  be 
increased  to  a  minimum  of  20  per  cent  by  February 
24.  Millers  were  required  to  increase  their  milling 
proportion  from  2  to  4  per  cent,  by  producing  the 
standard  barrel  (196  pounds)  from  264  pounds  of 
wheat.  "If  you  bake  bread  at  home,"  urged  Mr. 
Hoover,  "use  wheat  substitutes ;  if  you  buy  it,  buy 
only  Victory  Bread."  ^  Under  the  license  regula- 
tions, wholesalers  were  required  not  to  buy  more 
than  70  per  cent  of  their  purchases  of  flour  from 
millers  as  based  on  their  purchases  for  the  corre- 
sponding months  of  the  preceding  year ;  their  sales 
to  retailers  were  prescribed  as  one  pound  of  wheat 
flour  to  one  pound  of  other  cereals  —  the  propor- 
tion which  retailers  sold  to  consumers.     The  rules 

»  Com.  and  Fin.  Chron.,  Feb.  2,  1918,  p.  443.  ^  jj^. 


70  PROBLEMS  OF  RECONSTRUCTION 

also  covered  the  amount  of  flour  used  in  the  manu- 
facture of  macaroni,  spaghetti,  noodles,  crackers, 
breakfast  foods,  pies,  cakes,  and  pastry.^ 

The  regulations  were  somewhat  relaxed  as  to  meat 
by  an  order  of  February  22,  when  the  restrictions 
were  lifted  until  April  15,  in  the  States  west  of  the 
Mississippi,  on  the  use  of  mutton  and  lamb.  Mr. 
Hoover  announced  that  these  products  were  not 
exported  to  the  Allies.  However,  he  urged  absti- 
nence on  meatless  Tuesday,  because  if  the  use  were 
confined  to  the  other  six  days,  it  would  displace  a 
certain  amount  of  beef  and  pork;  whereas  if  mut- 
ton and  lamb  were  consumed  on  Tuesday,  an  equiv- 
alent amount  of  beef  and  pork  would  be  consumed 
on  other  days  of  the  week.  The  Food  Administra- 
tion announced  that  since  the  inauguration  of 
meatless  days  the  first  of  November,  upwards  of 
140,000,000  pounds  of  beef  had  been  saved  through 
conservation  measures.^ 

On  various  occasions,  consumers  have  been  asked 
to  pledge  themselves  to  save  food  products.  The 
week  beginning  October  28,  for  example,  was  desig- 
nated "Food  Pledge  Week,"  and  canvassers  through- 
out the  country  undertook  to  obtain  promises  from 
consumers  to  obey  the  rules  of  economy.^  Un- 
doubtedly, millions  of  people  have  kept  their  pledges 
faithfully,    but    it    would    be    impossible   to   state 

1  Com.  and  Fin.  Chron..  Feb.  2,  1918,  p.  443. 

2  Ibid.,  March  2,  1918,  p.  879. 

3  Bus.  Dig.,  Nov.  7,  1917,  p.  279;  O.  B.,  Nov.  2,  1917,  p.  4;  Nov.  9, 
p.  2. 


WAR  CONTROL  71 

with  any  degree  of  accuracy  how  much  saving  has 
resulted. 

It  is  not  necessary  at  this  point  to  explain  how 
far  these  various  methods  of  control  depart  from  the 
prevailing  order  of  a  year  ago.  The  new  system 
works  profound  changes  in  the  relations  between 
government  and  industry,  and  between  producers 
and  consumers.  As  with  former  topics,  the  ques- 
tions are  pressing  for  an  answer,  "What  will  be  the 
result  of  these  regulations,  and  what  reconstruction 
problems  do  they  raise?'*  The  answer  must  be 
postponed  until  we  have  studied  other  features  in 
the  development  of  war  control. 


CHAPTER  III 

DEVELOPMENT  OF  WAR  CONTROL  (Continued) 

Fuel  Administration 

The  Food  Act  conferred  the  authority  for  control 
not  only  of  foods  and  feeds  and  factors  necessary  for 
their  production,  but  also  for  fuel,  including  fuel 
oil  and  natural  gas.  The  powers  are  ample  for  a 
thorough  regulation  of  these  industries.  A  state- 
ment of  some  of  the  provisions  will  make  it  clear 
that,  as  applied  to  fuel,  these  powers  are  more 
extensive  than  in  the  case  of  food  products. 

According  to  section  25,  the  President  is  au- 
thorized and  empowered  "whenever  and  wherever 
in  his  judgment  necessary  for  the  efficient  prosecu- 
tion of  the  war,  to  fix  the  price  of  coal  and  coke, 
wherever  and  whenever  sold,  either  by  producer 
or  dealer,  to  establish  rules  for  the  regulation  of  and 
to  regulate  the  method  of  production,  sale,  ship- 
ment, distribution,  apportionment,  or  storage  thereof 
among  dealers  and  consumers,  domestic  or  for- 
eign." ^  In  the  event  that  producers  or  dealers  fail 
or  neglect  to  conform  to  the  prescribed  regulations, 
or  do  not  conduct  their  business  efficiently  under 
control,  or  manage  it  in  a  manner  prejudicial  to  the 
public    interest,    the    President    is    authorized    "in 

»  Public  No.  41,  op.  cit.,  pp.  9,  10. 

72 


WAR  CONTROL  7S 

every  such  case  to  requisition  and  take  over  the 
plant,  or  business,  and  all  appurtenances  thereof 
belonging  to  such  producer  or  dealer  as  a  going 
concern,  and  to  operate  or  cause  the  same  to  be 
operated  in  such  a  manner  and  through  such  agency 
as  he  may  direct  during  the  period  of  the  war  or 
for  such  part  of  said  time  as  in  his  judgment  may 
be  necessary."  Provisions  are  made  for  payment  in 
such  a  contingency.  Further,  if  the  President  is  of 
the  opinion  that  he  can  better  provide  for  the  com- 
mon defense,  he  is  empowered  to  "require  any  or 
all  producers  of  coal  and  coke,  either  in  any  special 
area  or  in  any  special  coal  fields,  or  in  the  entire 
United  States,  to  sell  their  products  only  to  the 
United  States  through  an  agency  to  be  designated 
by  the  President,  such  agency  to  regulate  the  resale 
of  such  coal  and  coke,  and  the  prices  thereof,  and 
to  establish  rules  for  the  regulation  of  and  to  regu- 
late the  methods  of  production,  shipment,  distri- 
bution, apportionment,  or  storage  thereof  among 
dealers  and  consumers,  domestic  or  foreign.  .  ."  ^ 
The  money  received  for  the  sale  of  coal  and  coke 
may  be  used  as  a  revolving  fund,  at  the  discretion 
of  the  President,  for  further  carrying  out  the  pur- 
poses of  the  act.  The  President  may  direct  the 
Federal  Trade  Commission  to  make  full  inquiry  into 
the  cost  of  production  under  reasonably  efficient 
management,  and  in  the  exercise  of  this  authority 
the  Commission  is  given  the  power  to  inspect  books, 
correspondence,   and   records.     Thus   the   act  con- 

1  Public  No.  41,  op.  cit.,  pp.  10,  11. 


74         PROBLEMS  OF  RECONSTRUCTION 

veys  the  power  to  fix  prices,  regulate  conditions  of 
production  and  sale,  requisition  plants  and  prod- 
ucts, to  purchase  and  sell  coal  and  coke,  and,  under 
certain  conditions,  to  take  over  production. 

It  is  evident  from  this  brief  outline  that  the  powers 
of  control  of  coal  and  coke  are  far  more  extensive 
than  with  food  products.  This  is  notably  the  case 
with  the  power  to  fix  prices  and  to  take  over  the 
agencies  of  production.^  These  provisions  are  the 
cause  of  considerable  differences  in  the  administra- 
tion of  fuel  and  food  conditions.  The  Fuel  Admin- 
istrator, for  example,  fixes  prices  for  coal  and  coke, 
whereas  the  usual  method  in  the  case  of  food  prod- 
ucts is  to  determine  fair  profit  margins,  thus  reach- 
ing the  price  indirectly. 

In  his  effort  to  solve  the  fuel  problems  the  ad- 
ministrator has  encountered  many  problems  peculiar 
to  the  industry.  Unlike  food  products,  it  is  not 
possible  to  rely  to  any  considerable  extent  on  sub- 
stitutes. The  demand  is  for  coal  and  coke,  and  one 
of  the  greatest  problems  is  to  find  the  supply  to 
satisfy  the  ever  increasing  demand.  The  demand, 
moreover,  has  increased  out  of  all  proportions  to 
the  ability  to  supply  all  consumers.  This  demand 
arises  partly  from  the  needs  of  the  new  war  indus- 
tries and  of  the  increasing  shipping  of  the  United 
States.  A  part  of  the  burden  of  supplying  the 
ocean  marine,  formerly  dependent  on  England,  fell 
upon  this  country.  Meanwhile,  the  severe  winter 
of    1917-1918    greatly    increased    the    demands    of 

*  Public  No.  41,  op.  cii.,  compare  with  sections  4,  5,  9,  12. 


WAR  CONTROL  75 

householders ;  and  in  addition,  the  needs  of  the 
peace  industries  always  had  to  be  considered.  On 
the  side  of  supply,  also,  special  difficulties  were 
encountered.  These  were  largely  results  of  the 
drift  of  mine  laborers  to  other  industries  due  to  the 
higher  offer  of  wages  and  better  conditions,  the 
draft,  car  congestion  and  shortage,  and  the  periodic 
disruption  of  productive  forces  at  the  mines  due 
largely  to  causes  just  named. 

Nor  do  the  above  cover  all  the  difficulties.  The 
Fuel  Administrator  has  been  confronted  with  no 
mere  mythical  Scylla  and  Charybdis,  for  on  the  one 
hand,  he  had  to  consider  the  dangers  of  public  un- 
rest and  criticism  because  of  prices  which  were  con- 
sidered unreasonable,  and  on  the  other,  he  had  to 
allow  producers  a  sufficient  return  to  augment  the 
supply.  The  production  of  coal,  like  that  of  the 
products  of  the  field,  is  under  the  principle  of  in- 
creasing cost.  Thus,  price  fixing  encounters  the 
difficulty  of  making  equitable  adjustments  between 
low  and  high  cost  producers.  The  administrator 
is  under  the  necessity  of  getting  as  large  a  supply  as 
possible;  but  if  he  fixes  prices  too  low,  high-cost 
producers  must  quit;  on  the  other  hand,  if  the 
price  is  high  enough  to  give  the  latter  a  chance,  the 
low-cost  producers  reap  unusual  returns.  Thus,  it 
was  inevitable  from  the  start,  that  the  charge  of 
"profiteering"  would  arise  in  connection  with  the 
coal  industry.  To  quote  from  the  report  of  the 
Federal  Trade  Commission:  "The  situation  in  coal 
gives  still  another  angle  of  view  to  the  same  prob- 


76  PROBLEMS  OF  RECONSTRUCTION 

lem.  Maximum  prices  were  fixed  by  territorial 
divisions.  Many  of  the  coal  producers  have  not 
taken  the  maximum,  but,  due  to  the  fact  that  in  a 
given  field  there  is  a  very  wide  range  in  the  cost  of 
the  coal  produced  in  that  field  it  follows  that  cer- 
tain low-cost  producers  have  made  very  large  mar- 
gins under  the  system  of  governmental  fixed  prices 
for  the  field.  Many  high-cost  producers  have  made 
small  margins.  The  bulk  of  the  production,  of 
course,  enjoys  the  large  margin.  .  .  .  Percentages 
of  profit  worked  upon  investment  will  obviously  be 
very  large  in  the  case  of  low-cost  companies."  ^ 

Another  diflSculty  of  great  moment  was  to  devise 
economies  in  the  distribution  of  coal.  This  was 
imperative  because  of  the  need  of  utilizing  car 
capacity  to  the  fullest  extent,  and  of  saving  car 
mileage.  The  prevailing  method  of  distribution 
frequently  necessitated  supplying  coal  to  any  given 
community  from  widely  separated  fields,  and  in- 
volved much  cross  hauling.  If  a  change  in  method 
involved  obtaining  the  product  from  other  than 
customary  sources,  it  encountered  the  difficulty  of 
depriving  consumers  of  kinds  to  which  they  had  long 
become  accustomed.  Manufacturers,  moreover,  re- 
quired a  considerable  variety  for  various  industrial 
uses,  and  it  was  still  necessary  to  administer  to  these 
specialized  needs.  The  principal  task  of  the  Fuel 
Administrator  has  been  to  solve  the  problems  out- 
lined above. 

In  most  respects,  the  plan  of  organization  of  the 

1  Senate  Doc.  No.  248,  op  cit.,  p.  6. 


WAR  CONTROL  77 

Fuel  Administration  is  analogous  to  that  for  food 
products.  The  Fuel  Administrator  is  assisted  by 
state  and  local  officers  acting  under  his  direction. 
Early  in  September  1917,  Mr.  Garfield  announced 
that  he  would  choose  a  representative  in  each  State 
and  Territory  and  that  he  would  appoint  a  com- 
mittee to  act  with  the  state  representative  in  regu- 
lating the  sale  of  coal.  State  administrators  were 
to  choose  a  committee  of  citizens  to  represent  the 
Fuel  Administration  in  each  county,  and  in  each 
city  and  town  with  a  population  over  2500.  That 
is,  state  officers  were  chosen  by  the  Federal  Fuel 
Administration,  and  those  for  the  local  divisions 
by  the  state  representative.^ 

One  of  the  duties  of  these  various  committees  was 
to  ascertain  and  report  to  the  Fuel  Administration 
a  reasonable  retail  profit  margin.  This  included 
the  cost  of  local  distribution  plus  a  reasonable 
dealer's  profit.  The  price  to  the  consumer  was  to 
include  this  margin,  transportation  charges  and 
jobber's  commissions,  and  the  price  at  the  mine  as 
named  by  the  President.  Even  at  this  early  date, 
it  was  planned  to  compile  figures  of  local  demands 
so  that  the  Fuel  Administration  could  if  necessary 
apportion  the  coal  supply  to  meet  the  greatest  needs. 
Mr.  Garfield  was  of  the  opinion  that  a  sufficient 
amount  of  coal  could  be  put  on  the  market  at  once 
to  satisfy  domestic  consumers  and  that  the  supply 
would  be  made  available  "by    voluntary   arrange- 

1  O.  B.,  Sept.  8,  1917,  p.  1 ;  Com.  and  Fin.  Chron.,  Oct.  13,  1917, 
p.  1455;  Com.  and  Fin.  Chron.,  Oct.  27,  1917,  p.  1670. 


78  PROBLEMS  OF  RECONSTRUCTION 

ment  between  the  operators  and  those  with  whom 
they  have  contracts,  and  thus  make  it  unneces- 
sary for  the  Fuel  Administration  to  exercise  or 
recommend  the  powers,  the  exercise  of  which  is 
provided  in  the  Lever  Act."  ^ 

The  organization  outHned  above  embodies  the 
framework  of  the  plan  for  fuel  control.  From  time 
to  time  other  oflScers  have  been  added.  Among 
these  were  district  representatives  or  managers  to 
supervise  the  distribution  of  coal  from  the  twenty 
odd  producing  districts  into  which  the  country  was 
divided.  Their  duties  are  made  clear  by  the  fol- 
lowing statement  of  Mr.  Garfield  issued  December 
21,  1917:  "The  deputy  distributors  are  not  to  be 
confused  with  the  fuel  administrators,  whose  duties 
and  responsibilities  remain  as  heretofore.  The  duty 
of  the  deputy  distributor  is  to  facilitate  the  ship- 
ment of  coal  to  meet  emergencies  on  requests  and 
orders  from  the  United  States  Fuel  Administrator 
and  from  the  state  fuel  administrators,  to  make 
equitable  allotment  of  such  orders  among  oper- 
ators, and  to  keep  the  Fuel  Administration  at 
Washington  informed  of  conditions  in  each  pro- 
ducing district.  Authority  is  not  given  to  the 
deputy  distributors  to  determine  priority  of  needs, 
nor  to  prefer  one  consignee  over  another.  This  au- 
thority is  reserved  to  the  United  States  Fuel  Admin- 
istrator, and  when  so  authorized,  to  the  state  fuel 
administrators.  It  is  to  be  noted  that  the  agency 
is   intended   primarily   to    meet   emergency   needs. 

1  O.  B.,  Sept.  8,  1917,  pp.  1,  2. 


WAR  CONTROL  79 

Under  normal  conditions  the  purchaser  will  be  left 
as  free  as  the  war  emergency  permits  to  deal  di- 
rectly with  the  operators  producing  coal."  ^ 

Fuel  administration  in  the  United  States  was 
formally  inaugurated  August  23,  1917,  when  Mr. 
Harry  A.  Garfield  was  appointed  Federal  Fuel  Ad- 
ministrator by  executive  order.  The  general  policy 
of  the  new  organization,  as  stated  by  Mr,  Garfield, 
was  "to  secure  the  largest  possible  production  of 
fuel  at  prices  just  to  the  producer  and  reasonable  to 
the  consumer."  ^  Elsewhere  Mr.  Garfield  said : 
*'It  is  the  purpose  of  the  Fuel  Administration  to 
encourage  production,  to  utilize,  as  far  as  possible, 
all  existing  agencies,  to  seek  the  advice  of  experts 
and  the  cooperation  of  operators  and  miners,  of  in- 
dustrial and  domestic  consumers,  and  of  all  who 
perform  a  useful  service  in  the  production  and 
distribution  of  coal."  '  This  general  policy  was  yet 
to  be  worked  out  in  detail.  The  principal  concrete 
factors  in  the  prospective  program  included  the 
regulation  of  prices  and  profits,  adjustment  of  dif- 
ferences between  mine  laborers  and  operators  to 
prevent  the  work  from  being  interrupted,  planning 
economical  methods  of  distribution,  conservation 
measures,  and,  when  necessary,  plans  for  the  sup- 
ply of  industrial  consumers  in  the  order  of  their 
importance  for  the  prosecution  of  the  war.  We  may 
discuss  the  development  of  the  coal  program  in  this 
order. 

Some  steps  had  been  taken  to  regulate  prices  be- 

»  0.  B..  Dec.  28,  1917,  p.  3.   » Ibid..  Sept.  6,  1917,  p.  1.   » Ibid. 


80  PROBLEMS  OF  RECONSTRUCTION 

fore  Mr.  Garfield  took  charge.  On  June  28  a  special 
committee  representing  upwards  of  four  hundred  coal 
operators  agreed  on  reductions  ranging  from  $1  to 
$5  a  ton  on  bituminous  coal  produced  from  the 
mines  east  of  the  Mississippi  River.  This  meeting 
had  been  called  at  the  instance  of  the  chairman  of 
the  Committee  on  Coal  Production  of  the  Council 
of  National  Defense.  To  avoid  the  possibility  of 
violating  the  anti-trust  laws,  the  operators  agreed  to 
place  the  work  of  price  fixing  in  the  hands  of  the 
Coal  Production  Committee  of  the  Council,  the 
Secretary  of  the  Interior,  and  a  representative  of  the 
Federal  Trade  Commission.  In  addition  to  the  re- 
duction of  prices,  the  committee  limited  commission 
charges  of  jobbers,  brokers,  retailers,  and  commis- 
sion men  to  25  cents  a  ton.  Thus,  the  consumer  was 
to  obtain  coal  at  the  mine  price  plus  transportation 
expenses  and  the  commission  named. ^  The  new 
prices  called  for  a  maximum  of  $3.50  a  ton  for 
domestic  coal  and  a  maximum  of  $3  for  all  other 
coal,  f.o.b.  the  mines,  effective  July  1. 

One  of  the  resolutions  of  the  conference  was  to  the 
effect  "That  it  is  the  sense  of  this  meeting  that  a 
committee  of  seven  for  each  coal-producing  State 
and  an  additional  committee  of  seven  appointed 
by  the  representatives  of  the  anthracite  industry 
be  appointed  by  the  representatives  of  each  State 
now  attending  this  convention  to  confer  with  the 
Secretary  of  the  Interior,  the  Federal  Trade  Com- 
mission, and  the  Committee  on  Coal  Production  of 

1  Com.  and  Fiu.  Chron.,  June  30,  1917,  p.  2604. 


WAR  CONTROL  81 

the  Council  of  National  Defense,  to  the  end  that 
production  be  stimulated  and  plans  be  perfected  to 
provide  adequate  means  of  distribution,  and,  fur- 
ther, that  these  committees  report  forthwith  to  the 
Secretary  of  the  Interior,  the  Federal  Trade  Com- 
mission, and  the  Committee  on  Coal  Production  of 
the  Council  of  National  Defense,  costs  and  condi- 
tions surrounding  the  production  and  distribution  of 
coal  in  each  district,  and  that  these  committees  are 
authorized,  in  their  discretion,  to  give  assent  to 
such  maximum  prices  for  coal  f.o.b.  cars  at  the 
mines  in  the  various  districts  as  may  be  named  by 
the  Secretary  of  the  Interior,  the  Federal  Trade 
Commission,  and  the  Committee  on  Coal  Produc- 
tion of  the  Council  of  National  Defense."  ^  It  is  to 
be  noted  that  this  meeting  was  held  before  the  Food 
Act  was  passed  and  that  the  resolution  indicates  the 
operators'  plan  for  the  regulation  of  the  industry. 

The  program,  however,  was  promptly  repudiated 
by  Secretary  Baker,  as  president  of  the  Council 
of  National  Defense,  on  the  ground  that  the  coal- 
production  committee  was  subordinate  to  the  Coun- 
cil, purely  advisory  in  character,  and  formed  for  the 
purpose  of  advising  the  Council  of  steps  which  might 
lead  to  the  stimulation  of  production  and  better 
methods  of  distribution,  and  that  no  power  had 
been  delegated  to  it  to  deal  with  prices.  He  added 
that  the  Federal  Trade  Commission  had  been  in- 
structed by  the  President  to  obtain  costs  of  pro- 
duction of  coal  and  that  "the  information  I  have 

1  Com.  and  Fin.  Chron.,  June  30.  1917,  p.  2604. 
G 


82  PROBLEMS  OF  RECONSTRUCTION 

from  that  and  other  sources,  I  think,  justified  me 
in  believing  that  the  price  of  $3  suggested,  or 
agreed  on,  as  a  maximum  is  an  exorbitant,  unjust, 
and  oppressive  price."  ^ 

As  a  sort  of  forerunner  of  federal  control,  the 
Federal  Trade  Commission,  after  an  investigation 
of  113  retailers  and  3  wholesalers  in  Washington,  an- 
nounced, about  August  15,  that  the  margins  were 
excessive  and  should  be  reduced.  The  Commission 
again  encountered  the  same  old  difficulty  of  stating 
fair  prices,  namely,  the  differences  in  cost  of  han- 
dling by  large  and  small  dealers.^ 

The  President's  proclamation  of  July  9,  effective 
July  15,  prohibited  the  exportation,  except  under 
license,  of  coal,  coke,  fuel  oils,  kerosene,  and  gaso- 
line, including  bunkers.  In  an  accompanying  state- 
ment the  President  declared  that  the  policy  of  the 
Government  would  be  first  to  consider  American 
needs,  and  then  to  meet,  as  far  as  possible,  the  re- 
quirements of  the  Allies,  and  to  supply  neutral 
countries.  By  all  means,  essential  commodities  were 
to  be  prevented  from  reaching  the  Central  Powers.^ 

The  proclamation  of  August  21,  issued  under 
authority  of  the  Food  Control  Act,  formally  put  coal 
production  and  distribution  under  control.  Prices 
were  fixed  for  three  classes,  "run  of  mine,"  "pre- 
pared sizes,"  and  "slack  of  screenings,"  covering 
coal  produced  in  29  regions,  most  of  which  were  cov- 

1  Com.  and  Fin.  Chron.,  July  7,  1917,  p.  21. 

8  O.  B.,  Aug.  15,  1917,  p.  6. 

8  Com.  and  Fin.  Chron.,  July  14,  1917,  p.  134 


WAR  CONTROL  8S 

ered  by  state  boundaries.  The  prices,  for  example, 
for  these  three  classes  of  coal  in  Pennsylvania  were 
$2,  $2.25,  and  $1.75,  respectively.  For  Washing- 
ton state,  where  the  prices  were  the  highest,  the 
amounts  were  $3.25,  $3.50,  and  $3.^  Evidently, 
these  figures  were  considerably  lower  than  those 
agreed  upon  by  the  operators  at  the  conference  of 
June  28.  The  President  announced  that  the  prices 
were  provisional,  and  were  based  on  the  "actual  cost 
of  production  and  are  deemed  to  be  not  only  fair 
and  just  but  liberal  as  well.  Under  them  the  in- 
dustry should  nowhere  lack  stimulation."  ^  Sub- 
sequently, measures  were  to  be  devised  to  establish 
a  fair  and  equitable  control  of  the  distribution  of  the 
supply  and  of  prices  not  only  at  the  mines  but  in 
the  hands  of  middlemen  and  retailers. 

In  a  statement  of  August  23,  the  President  de- 
fined "jobber"  and  stated  the  margins.  In  buying 
and  selling  bituminous  coal,  jobbers  were  not  to 
add  to  their  purchase  price  a  gross  margin  in  excess 
of  15  cents  a  ton  of  2000  pounds,  and  the  combined 
gross  margin  of  any  number  of  jobbers  buying  and 
selling  a  given  shipment  was  not  to  exceed  this 
amount.  In  the  case  of  anthracite,  where  the 
product  was  sold  east  of  Buffalo,  it  was  not  to  be 
more  than  30  cents.  Combined  margins  on  given 
shipments  were  also  limited  to  this  amount.  At 
the  same  time,  the  price  of  anthracite  was  fixed  free 
on  board  cars  at  certain  railroads.' 

» O.  B.,  Aug.  22,  1917,  p.  1.  a  Ibid. 

s  Ibid..  Aug,  24,  1917,  pp.  1  and  2. 


84  PROBLEMS  OF  RECONSTRUCTION 

These  orders  still  left  for  determination  retailers* 
margins.  This  feature  was  covered  in  a  statement 
of  Mr.  Garfield  about  October  1.  The  maximum 
gross  margin  was  understood  to  be  the  difference 
between  the  average  cost  of  coal  and  coke  at  the 
retailers'  yard,  wharf,  or  siding,  and  the  price  at 
which  they  sell  to  consumers.  According  to  the 
new  plan,  the  retailer  was  to  ascertain  his  margin 
for  1915,  when  conditions  were  more  nearly  normal. 
To  this  he  was  permitted  to  add  not  in  excess  of 
30  per  cent ;  but  in  no  case  was  the  gross  margin  to 
be  greater  than  that  which  prevailed  during  July, 
1917.^  Mr.  Garfield  believed  this  policy  would  be 
fair  to  both  retailers  and  consumers,  and  that  it 
would  remove  public  uncertainty  regarding  coal 
prices  and  also  the  uncertainty  as  to  whether  or 
not  to  buy.  The  administrator  clearly  recognized 
that  in  some  communities  the  cost  of  handling  was 
higher  than  in  1915,  but  he  stated  that  when  this 
could  be  demonstrated  the  local  fuel  administrators 
would  be  authorized  to  adjust  the  differences.  On 
the  other  hand,  changes  would  be  made  if  the  stated 
margins  were  too  high.  In  any  event,  all  demands 
for  readjustments  were  to  be  taken  up  in  the  first 
instance  by  the  resident  committees  appointed  by 
the  local  fuel  administrators.^ 

The  general  policy  of  regulating  prices  and  profits 
is  contained  in  the  above  description.  Subsequent 
developments  have  been  in  the  direction  of  ex- 
tending and  defining  the  plan.     While  the  method 

1  O.  B.,  Oct.  1,  1917,  p.  1.  *  Ibid. 


WAR  CONTROL  85 

discussed  above  puts  great  power  in  the  hands  of 
the  Fuel  Administrator,  it  has  the  advantage  of 
flexibility.  Readjustments  to  meet  local  condi- 
tions, or  new  general  changes,  are  easily  accom- 
plished- Such  flexibility,  of  course,  is  necessary, 
because  cost  conditions  are  constantly  in  the  state 
of  flux.  It  has  been  necessary,  for  example,  to  read- 
just coal  and  coke  prices  because  of  advances  in 
wages.  This  was  the  occasion  for  the  President's 
order  of  October  27,  which  added  45  cents  a  ton  to 
each  of  the  prices  prescribed  in  the  proclamation 
of  August  21.  The  advance  was  subject  to  certain 
limitations,  namely,  it  was  not  to  apply  to  any  coal 
sold  at  the  mine  under  an  existing  contract  contain- 
ing a  provision  for  an  increase  in  the  price  of  coal 
in  the  case  of  an  increase  in  wages  paid  to  miners. 
Nor  was  it  to  apply  in  any  district  where  operators 
and  miners  failed  to  agree  upon  a  penalty  provision 
satisfactory  to  the  Fuel  Administrator.^  The  agree- 
ment covering  the  wage  increase  was  effected  be- 
tween miners  and  operators  October  6.  The  ad- 
vance amounted  to  10  cents  per  ton  for  miners, 
from  75  cents  to  $1,40  a  day  for  laborers,  and  15 
per  cent  for  yardage  and  dead  work.  Mr.  Garfield 
estimated  that  this  would  result  in  an  increase  over 
the  wages  of  April  1,  1914,  of  50  per  cent  for  miners, 
and  of  78  per  cent  for  the  best  paid  laborers.  But 
he  maintained  that  the  "increases  are  not  in  excess 
of  the  advance  in  the  cost  of  living  for  that  period."  ^ 

1  O.  B.,  Oct.  29.  1917,  p.  2;    Mo.  Rev.  U.  S.,  Bu.  Lab.  Stats..  Dec. 
1917,  p.  110.  *Ibid. 


86  PROBLEMS  OF  RECONSTRUCTION 

With  regard  to  the  justness  of  the  new  prices,  Mr. 
Garfield  stated  that  it  was  his  understanding  in 
fixing  provisional  prices  that  "it  was  intended  to 
allow  a  fair  profit  to  the  operators.  The  public 
does  not  desire,  nor  is  it  necessary  to  meet  the 
present  emergency,  that  the  coal  industry  should 
be  asked  to  make  more  of  a  sacrifice  than  may 
reasonably  be  required  of  all  staple  industries. 
Exorbitant  prices  only  have  been  the  subject  of 
concern.  It  needs  no  argument  to  justify  congres- 
sional and  executive  action  when  the  people  of  the 
United  States  are  called  upon  to  make  unusual  sac- 
rifices." ^ 

On  the  recommendation  of  the  Fuel  Administra- 
tor, the  prices  of  anthracite  were  advanced  35  cents 
a  ton  by  executive  order  of  December  1,  1917,  to 
cover  advances  in  wages  in  that  branch  of  the  in- 
dustry. Unlike  the  policy  pursued  with  the  bitu- 
minous operators,  the  Fuel  Administrator  did  not 
insist  on  the  inclusion  of  the  automatic  penalty 
clause,  on  the  ground  that  the  Board  of  Conciliation 
appointed  by  ex-President  Roosevelt  in  1902  had 
handled  the  anthracite  situation  satisfactorily.^ 

A  further  development  of  the  price  policy  is  seen 
in  a  letter  of  Mr.  Garfield,  dated  November  8,  to 
state  fuel  administrators  advising  them  to  examine 
profits  of  particular  retailers  if  it  appeared  that 
unreasonable  prices  were  demanded.     He  suggested 

1  0.  B.,  Oct.  29,  1917,  p.  2;  Mo.  Rev.  U.  S.,  Bu.  Lab.  Statistics,  Dec. 
1917.  p.  110. 

»  Bus.  Dig.,  Dec.  19, 1917,  p.  518;  Com.  and  Fin.  Chron.,  Dec.  8, 1917, 
p.  2229. 


WAR  CONTROL  Si 

that  the  local  committees  make  careful  investiga- 
tion of  the  costs  of  doing  business  by  each  dealer ; 
if  it  was  evident  that  profits  were  unreasonable,  the 
committee  was  instructed  to  arrive  at  a  fair  margin, 
send  their  recommendations  to  the  Fuel  Adminis- 
trator, who  would  then,  if  the  findings  were  equi- 
table, confirm  such  prices,  subject  to  appeal  to  the 
Fuel  Administration.  He  urged,  moreover,  that  the 
proper  basis  of  figuring  profits  was  a  stated  amount, 
rather  than  a  percentage,  since  the  latter  method 
gave  "the  less  eflScient  dealer  with  high  costs  a 
larger  actual  profit  than  the  more  eflficient  dealer 
with  lower  costs."  ^ 

The  purpose  of  a  number  of  orders  has  been  to 
reach  practices  of  dealers  who  were  evading  the  fuel 
orders.  One  method  of  obtaining  unlawful  profits 
was  the  practice  of  "swapping  coal,"  by  which  two 
operators  agreed  to  act  as  jobbers  for  each  other, 
each  collecting  the  margin.  Sometimes  a  similar 
end  was  accomplished  by  organizing  subsidiary  com- 
panies, the  purpose  of  which  was  to  act  as  "os- 
tensible jobbers"  of  the  producing  companies; 
these  collected  the  margins  allowed  by  the  Fuel 
Administration.  The  effect  of  such  practices,  ac- 
cording to  Mr.  Garfield,  was  to  add  from  15  to  30 
cents  a  ton  to  the  cost  of  coal  to  consumers.  After 
an  investigation  "of  every  phase  of  the  situation, 
which  included  conferences  with  representatives  of 
every  branch  of  the  coal  business,  the  Fuel  Admin- 
istration decided  that  the  only  solution  was  to  rec- 

1  Com.  and  Fin.  Chron.,  Nov.  10.  1917,  p.  1853;  Feb.  2,  1918,  p.  452. 


88         PROBLEMS  OF  RECONSTRUCTION 

ommend  to  the  President  the  revocation  of  the 
regulation  allowing  the  commission  or  margin  to 
the  jobber,  and  as  a  substitute  the  fixing  of  prices 
of  coal  at  the  mine  that  will  enable  the  operator  to 
compensate  the  bona  fide  jobber  for  his  services."  ^ 
A  letter  containing  this  statement  was  issued  March 
3,  1918. 

The  problem  of  "additional  charges"  has  also 
caused  the  Fuel  Administration  much  trouble.  A 
regulation,  effective  June  22,  1918,  was  to  cover 
this  practice.  Producers,  distributors  and  retailers 
were  prohibited  from  adding  to  the  price  any  trans- 
portation charges  in  excess  of  amoimts  actually 
paid.  Nor  could  they  add  advances  in  freight  rates 
on  coal  or  coke  stored  for  their  account,  or  held  for 
their  credit,  unless  the  increase  were  really  paid.* 
Many  orders  have  been  issued  fixing  the  prices  of 
coal  and  coke ;  however,  these  contain  no  new  prin- 
ciples, but  are  based  upon  those  already  expounded.' 

In  addition  to  price  and  profit  problems,  the  Fuel 
Administrator  has  had  to  give  considerable  atten- 
tion to  questions  of  labor  supply,  and  the  relations 
between  mine  operators  and  laborers.  These  prob- 
lems are  complicated  by  the  fact  that,  with  prices 

^  Com.  and  Fin.  Chron.,  March  16,  1918,  p.  1088. 

*0.  B.,  July  2,  1918,  p.  8. 

^Ibid.,  Oct.  1,  1917,  p.  1;  Nov.  21,  1917,  p.  3;  April  4,  1918,  p.  2; 
June  24,  1918,  p.  6;  July  2,  1918,  p.  8;  July  8,  1918,  p.  16;  July  13, 
1918,  pp.  3,  16;  Com.  and  Fin.  Chron.,  Nov.  17,  1917,  p.  1949;  Nov.  24, 
1917,  p.  2053;  Feb.  2,  1918,  p.  452;  Bus.  Dig.,  Aug.  29,  1917,  p.  1316; 
Dec.  12,  1917,  p.  481;  Dec.  19,  1917,  p.  518;  Feb.  27,  1918,  p.  285; 
June  5,  1918,  p.  751. 


WAR  CONTROL  89 

fixed,  employers  are  the  more  reluctant  to  grant 
wage  increases  without  assurances  from  the  Fuel 
Administrator  that  prices  can  be  readjusted  to  cover 
a  reasonable  profit.  Hence  the  danger  of  strikes  is 
greatly  increased.  This  question  was  involved  in 
the  advance  in  prices  discussed  on  a  former  page.^ 
The  wage  contract  has  been  settled  between 
operators  and  miners  as  heretofore,  but,  on  several 
occasions,  the  Administrator  has  been  compelled  to 
exert  pressure  on  one  party  or  the  other  to  prevent 
interruption  of  work  at  the  mines.  Thus,  in  Octo- 
ber 1917,  when  he  had  the  question  of  advance  of 
coal  prices  under  advisement,  Mr.  Garfield  issued  a 
stern  note  to  the  impatient  miners  of  the  south- 
western fields.  *' There  are  evidently  some,"  he 
said,  "who  fail  to  understand  the  gravity  of  the 
situation  and  who  do  not  hesitate  to  advocate 
strikes  at  the  present  time  as  a  means  of  forcing  the 
Government  to  at  once  decide  whether  the  wage 
increase  agreed  to  at  the  meetings  recently  held  at 
Washington  by  the  operators  and  miners  of  the 
Central  District  should  justly  be  covered  by  an 
advance  in  the  prices  fixed  by  the  President.  The 
matter  has  been  submitted  to  me,  and  all  con- 
cerned are  expected  to  cooperate.  I  am  giving  im- 
mediate and  close  attention  to  the  question  and 
hope  to  reach  a  decision  at  an  early  date.  The 
only  circumstance  within  my  control  which  will 
delay  that  decision  will  be  the  violation  of  the 
spirit  of  the  arrangement   between   the  operators 

1  Cf.  ante.  p.  75. 


90  PROBLEMS  OF  RECONSTRUCTION 

and  the  miners,  which  was  that  under  no  circum- 
stances should  the  production  of  coal  in  the  United 
States  at  the  present  time  be  allowed  to  diminish. 
If  either  the  operators  or  the  miners  attempt  to  bring 
pressure  upon  me  to  reach  a  decision,  I  shall  post- 
pone it  and  use  whatever  powers  are  necessary  to 
compel  the  production  of  coal  to  meet  the  country's 
needs."  ^ 

In  a  similar  strain  was  Mr.  Garfield's  reply  to 
Oklahoma  operators  who  reported  that  they  were 
unable  to  carry  out  their  wage  agreements  unless 
permitted  to  increase  prices  over  and  above  the 
general  advance  announced  in  the  President's  proc- 
lamation of  October  27.  The  Fuel  Administrator 
replied  that  they  could  choose  between  two  alter- 
natives :  if  they  were  unable  to  operate  the  mines  at 
a  profit,  they  were  to  file  a  statement  showing  their 
1916  and  1917  costs  month  by  month,  in  which  case 
the  question  would  be  considered ;  or  they  could 
turn  over  the  mines  to  the  Fuel  Administration  for 
operation  pending  an  investigation  of  costs.  In 
any  case,  the  mines  were  not  to  be  shut  down.^ 

The  acceptance,  on  the  part  of  miners,  of  the 
penalty  clause  in  the  President's  orders  of  October 
27  has  been  a  stumblingblock  in  some  cases.  This 
regulation  was  to  the  effect  that  miners  who  struck 
without  cause  would  be  fined  $1  a  day  each,  and 
operators  locking  men  out  were  to  pay  $2  a  day 
for    each    man    not    working.^     The    southwestern 

I  Com.  and  Fin.  Chron.,  Oct.  20,  1918,  p.  1586. 

»  Ibid.,  Dec.  1,  1917,  p.  2139.      » Ibid.,  Dec.  1,  1917,  p.  2140. 


WAR  CONTROL  91 

miners,    for    example,    hesitated    about    accepting 
these  terms,  but  finally  gave  in. 

The  recent  development  of  a  comprehensive  plan 
of  labor  control  in  the  United  States  ^  has  affected 
the  policy  of  the  Fuel  Administration.  At  a  con- 
ference held  in  Washington  in  July,  between  Mr. 
Garfield  and  oflScers  of  the  United  Mine  Workers  of 
America,  an  understanding  was  reached  by  which  all 
questions  pertaining  to  mine  labor  were  to  remain 
under  the  jurisdiction  of  the  Fuel  Administrator.^ 
A  bureau  of  labor  was  created,  to  which  matters  of 
this  description  are  to  be  referred.  Meanwhile, 
definite  principles  were  established  for  guidance  in 
the  settlement  of  disputes ;  thus  all  persons  con- 
cerned may  know  in  advance  the  general  outlines  of 
the  prospective  settlement.  In  general,  these  prin- 
ciples are  similar  to  those  established  by  the  War 
Labor  Board,  and  need  not  be  discussed  at  this 
point.^  However,  one  of  the  rules  is  peculiar  to 
the  mine  labor  situation,  namely,  the  provision  that 
the  so-called  automatic  penalty  clause  now  in  force 
is  to  be  accepted  as  a  cardinal  principle  by  mine 
workers  in  collective  bargaining  during  the  war, 
and  is  to  be  included  in  all  agreements  as  a  condi- 
tion precedent  to  the  allowance  of  any  increase  in 
the  fixed  prices  permitted  by  the  Fuel  Adminis- 
tration to  the  operators.  The  penalty  clause  has 
been  described  on  a  former  page.* 

1  Cf.  infra.  2  O.  B.,  July  25,  1918,  p.  13. 

*  Cf.  discussion  of  war  labor  control  in  subsequent  pages. 

*  Cf .  supra. 


92  PROBLEMS  OF  RECONSTRUCTION 

In  another  respect  the  Fuel  Administration  has 
found  it  necessary  to  adopt  an  element  of  the  war 
labor  program  of  the  country.  As  in  other  indus- 
tries, mine  operators,  in  their  effort  to  obtain  men, 
have  been  bidding  against  each  other.  This  re- 
sults in  unrest  and  shifts,  which  continually  un- 
settle labor  conditions  at  the  mines,  and  threatens 
to  diminish  somewhat  the  supply  of  coal.  To  meet 
this  situation,  Mr.  Garfield  issued  a  warning  that 
the  payment  of  bonuses  in  any  form  is  contrary  to 
the  spirit  of  wage  agreements  made  by  operators 
and  miners  with  the  President.  If  such  bonuses 
were  paid  in  the  future,  in  violation  of  the  terms  or 
spirit  of  the  agreements,  the  Fuel  Administration 
would  assume  that  mine  prices  were  too  high  and 
a  reduction  would  be  ordered.^ 

On  a  preceding  page,  in  outlining  the  contents  of 
this  chapter,  we  called  attention  to  the  fact  that 
one  of  the  concrete  problems  confronting  the  Fuel 
Administrator  was  the  provision  for  more  econom- 
ical methods  in  the  distribution  of  coal.  Pooling 
arrangements,  to  cover  a  limited  portion  of  the  field, 
were  made  the  latter  part  of  November  1917,  when 
the  shortage  was  becoming  acute.  On  November 
23,  Mr.  Garfield  approved  of  the  principles  of  the 
Coal  Shipper's  Terminal  Pool  Association,  formed 
at  Cleveland  two  days  before.  This  organization 
came  into  existence  as  the  result  of  a  conference 
among  administrators,  operators,  and  railroad  men 
of  certain  sections  of  the  Middle  West.     Sub-com- 

1  Wall  Street  Journal,  Aug.  6,  1918;  O.  B.,  Aug.  6,  1918,  p.  7. 


WAR  CONTROL  9S 

mittees  were  appointed  resident  at  Cleveland, 
Cincinnati,  Columbus,  Toledo,  Pittsburgh,  and  De- 
troit, among  other  places,  to  decide  the  best  method 
of  shipment  for  various  grades  of  coal,  to  eliminate 
cross  hauling,  to  prevent  unnecessary  switching  at 
terminals,  and  to  take  other  steps  to  insure  the 
prompt  unloading  and  return  of  cars.  The  funda- 
mental purpose  of  the  pool  was  to  facilitate  deliveries 
of  coal  to  essential  industries  and  to  bring  about  a 
better  distribution  of  the  product.^  Some  persons 
forecasted  in  this  movement  the  development  of  a 
national  coal  pool  which  would  put  the  nation's 
entire  output  under  Government  control.  "The 
scheme  under  contemplation,"  it  was  said,  "calls 
for  the  establishment  of  large  regional  pools  which 
would  make  possible  the  greatest  degree  of  effi- 
ciency in  the  distribution  of  coal  to  all  sections  of 
the  country.  .  .  .  With  the  pooling  system  in  ef- 
fect, the  Government  would  have  absolute  control 
of  all  coal  mines  and  would  be  able  to  direct  sale  and 
distribution."  ^ 

The  plan  actually  adopted,  however,  differed 
greatly  from  the  one  just  described.  As  a  pre- 
liminary to  the  administration  plan,  an  order  was 
issued  December  27,  paving  the  way  for  complete 
control  of  coal  and  coke  output  of  the  country. 
The  order,  which  was  to  be  effective  immediately 
upon  the  termination  of  existing  contracts,  the 
majority  of  which  expired  April  1,  1918,  provided 
that  no  new  contracts  should  be  made  for  longer 

1  Com.  and  Fin.  Chron.,  Dec.  1,  1917,  p.  2139.  *  Ibid. 


94         PROBLEMS  OF  RECONSTRUCTION 

than  one  year,  that  contracts  were  subject  to  can- 
cellation by  the  Fuel  Administration,  and  that  coal 
sold  under  contract  was  subject  to  requisition  by 
the  Government.  One  of  the  purposes  of  the  order 
was  to  eliminate  agreements  which  stood  in  the  way 
of  the  prospective  plan  of  regional  distribution.^ 

The  intention  of  inaugurating  a  zone  system  was 
announced  by  Mr.  Garfield  on  December  26,  1917, 
in  testimony  before  a  Senate  committee  which  was 
investigating  the  coal  situation.  According  to  the 
proposed  plan,  the  country  was  to  be  divided  into 
districts  in  charge  of  representatives  responsible 
directly  to  the  Fuel  Administrator.  The  purpose  in 
view  was  a  method  of  distribution  that  would  in- 
sure the  speediest  possible  movement  of  coal  from 
mines  to  consumers,  and  the  prompt  return  of  cars 
from  consuming  centers.  Each  State  was  to  be 
allowed  its  quota  of  the  estimated  output,  and  the 
allotment  was  to  be  supplied  from  definitely  as- 
signed fields.  This  amounted  to  an  apportionment 
of  the  coal  output  of  the  country  among  the  States 
on  the  basis  of  previous  consumption.  The  ad- 
ministrator proposed  to  supply  state  officials  with 
information  as  to  the  particular  field  upon  which 
they  could  draw  and  the  quantities  to  which  they 
were  entitled.  When  a  State  was  currently  receiv- 
ing its  full  allotment  all  further  needs  were  to  be 
supplied  by  reducing  the  quantities  supplied  to 
other  consumers  within  the  State.^ 

In  announcing  the  zone  system  on  March  21,  the 

1  Bus.  Dig.,  Jan.  16,  1918,  p.  95.  ^  q  g.^  Jan.  26,  1918,  p.  1. 


WAR  CONTROL  95 

Fuel  Administrator  said  that  coal  would  be  dis- 
tributed "under  restrictions  that  will  avoid  as  far 
as  possible  waste  of  transportation  facilities,  but 
nevertheless  consistent  with  the  greatest  possible 
production  and  a  proper  coal  supply  to  all  coal 
users,"  and  that  "zones  have  been  established  so 
that  coal  supply  shall  be  normally  derived  from  the 
mines  relatively  near,  thus  preventing  these  ab- 
normal and  wasteful  transportation  movements,  in- 
suring more  equal  distribution  of  cars  to  the  mines 
and  more  steady  employment  to  mine  labor."  ^ 
In  depriving  the  consumer  of  coal  from  distant 
sources,  the  Fuel  Administrator  expressed  the  hope 
that  "he  will  realize  that  his  using  another  sort  of 
coal  is  an  essential  part  of  the  scheme  of  conservation 
in  the  interest  of  the  national  defense."  Under  the 
new  regulations,  producers  demanding  coal  for 
special  purposes,  such  as  the  by-products,  gas,  black- 
smith, and  metallurgical  varieties,  could  still  obtain 
their  supply  outside  the  zone  in  which  they  were 
situated. 

The  general  effect  of  the  zoning  system,  according 
to  Mr.  Garfield,  is  to  restrict  eastern  coals  to  eastern 
markets,  filling  the  vacancy  in  the  central  and 
western  states  from  the  product  of  those  areas. 
The  economies  of  the  new  system  are  estimated  in 
the  following  terms:  "Bituminous  coal,  the  move- 
ment of  which  is  regulated  by  the  zone  system,  is 
about  300,000,000  tons,  or  60  per  cent  of  the  total 

1  O.  B.,  March  ses,  1918,  p.  8;  Com.  and  Fin.  Chron.,  March  30,  1918, 
p.  1299. 


96         PROBLEMS  OF  RECONSTRUCTION 

production.  Based  on  this  production,  there  will  be 
saved  on  the  round  trip  from  and  to  the  mines  al- 
most 160,000,000  car  miles.  This  will  permit  the 
same  cars  to  make  almost  300,000  additional  trips 
to  the  mines,  equivalent  to  an  increase  of  5  per  cent 
in  the  production."  ^ 

A  final  concrete  problem  of  great  moment  was  to 
find  methods  of  conserving  the  consumption  of  coal. 
Price  policies  stabilized  prices  to  consumers,  machin- 
ery for  the  adjustment  of  labor  disputes  tended  to 
assure  continuous  production,  and  the  zone  system 
provided  for  economies  in  distribution ;  but  enough 
coal  could  not  be  produced  to  supply  all  consumers, 
and  it  was  found  necessary  in  addition  to  appor- 
tion the  supply  among  the  most  important  users. 

On  January  9,  Mr.  Garfield  announced  the  "coal 
budget  plan,"  which  contained  the  Fuel  Admin- 
istration's measures  for  supplying  coal  to  the  less 
essential  industries.  In  substance,  the  new  method 
called  for  conferences  with  representatives  of  par- 
ticular industries,  voluntary  agreements  with  each 
of  these  groups  to  restrict  output,  and  the  issuance 
of  a  formal  order  making  legal  and  binding  upon 
the  entire  industry  whatever  restrictions  were  vol- 
untarily agreed  upon.  The  essential  purpose  was 
not  to  close  the  establishments.  In  fact,  just  the 
reverse  was  the  object.  It  was  the  intention,  how- 
ever, to  compel  manufacturers  who  were  not  con- 
tributing directly  to  the  war  needs  to  cut  down 
operations  so  that  coal  thus  saved  could  be  sup- 

1  0.  B.,  March  23.  1918,  p.  8. 


WAR  CONTROL  97 

plied  to  industries  ranking  higher  in  the  order  of 
importance.  Consistent  with  this  plan,  it  was 
possible  to  conserve  by  reducing  running  hours,  by 
limiting  varieties  of  goods  manufactured,  by  elim- 
ination of  new  products,  by  more  efficient  man- 
agement, and  by  transferring  activity  from  non- 
war  to  war  industries.  Mr.  Garfield  made  clear  in 
his  explanations  that  the  term  "essential"  was 
relative.  Manufacturers  miscalled  "non-essential," 
he  maintained,  "are  the  backbone  of  the  country's 
economic  system.  They  employ  10,000,000  workers, 
and  from  them  must  come  the  taxes  and  bonds  which 
will  pay  for  the  war."  ^ 

The  percentage  of  reduction  proposed  for  the 
various  industries  depended  partly  on  the  character 
of  the  business  and  the  extent  to  which  it  con- 
tributed to  the  national  welfare,  and  partly  on  the 
advice  of  the  leaders  as  to  what  was  a  practicable 
and  safe  shrinkage  in  view  of  former  business  ac- 
tivity. At  the  time  the  statement  was  issued 
upwards  of  a  dozen  industries  had  agreed  to  restrict 
consumption,  with  a  prospective  saving  of  from 
15,000,000  to  20,000,000  tons.  By  agreements  in 
prospect  with  other  industries,  the  Fuel  Adminis- 
trator was  of  the  opinion  that  from  36,000,000  to 
50,000,000  tons  of  coal  would  be  saved  during  the 
current  year.  One  of  the  first  groups  to  volunteer 
a  reduction  was  the  American  Brewers'  Association, 
which  contributed  700,000  tons  to  the  conservation 
estimates.     Others     followed    promptly,     including 

1  Com.  and  Fin.  Chron.,  Feb.  2,  1918,  p.  451. 
H 


98  PROBLEMS  OF  RECONSTRUCTION 

manufacturers  of  paints  and  varnish,  wall  paper, 
confectionery,  artificial  ice,  boxboards,  and  glassware.^ 
The  concrete  application  of  the  budget  plan  makes 
clear  the  fact  that  enough  coal  was  to  be  supplied 
to  the  industries  in  question  to  enable  them  both  to 
keep  their  organization  under  control  and  to  con- 
tribute varying  amounts  of  their  products  to  non- 
war  consumers.  But  the  regulations  present  many 
perplexities  and  threaten  grave  injustice  to  the 
producers.  When  a  manufacturer  of  a  given  class 
of  goods,  for  example,  is  put  on  rations,  he  is  apt  to 
shift  to  other  commodities  of  a  similar  kind  and 
thus  thwart  the  purpose  of  the  orders.  With  the 
development  of  the  plan,  it  has  also  become  in- 
creasingly evident  that  even  among  peace  com- 
modities some  serve  a  more  important  purpose  than 
others,  and  this  is  true  even  among  manufacturers 
producing  certain  "lines"  of  goods.  It  is  therefore 
necessary  to  discriminate  in  favor  of  the  more  im- 
portant uses.  It  may  be  remarked  that  the  whole 
budget  plan,  with  its  concrete  applications,  suggests 
many  features  of  the  former  illegal  method  of  pool- 
ing by  which  the  output  was  cut  and  allotted  on 
the  basis  of  an  agreement.  For  the  reasons  named 
above,  the  Fuel  Administrator  has  been  compelled, 
not  only  to  prescribe  certain  percentages  of  output, 
but  to  regulate  many  of  the  features  of  operation. 
Some  of  the  problems  named  above  are  witnessed 

1  Com.  and  Fin.  Chron.,  Jan.  19,  1918,  p.  2.51;  Feb.  2,  1918,  p.  451; 
Bus.  Dig.,  Jan.  16.  1918,  p.  95;  Jan.  30,  1918,  p.  158;  O.  B.,  Jan.  11, 
1918,  p.  1. 


WAR  CONTROL  99 

in  the  regulation  of  producers  of  clay  products. 
Curtailment  was  based  on  the  average  output  of  the 
industry  during  the  past  three  years.  The  pro- 
duction of  stoneware  was  cut  only  15  per  cent,  be- 
cause vitrified  and  glazed  containers  are  required 
as  receptacles  for  food.  Sewer  pipes,  a  factor  con- 
tributory to  public  health,  and  drain  tile,  needed  for 
agricultural  purposes,  were  cut  only  25  per  cent. 
On  the  other  hand,  a  reduction  of  50  per  cent  was 
ordered  for  face,  paving,  and  common  brick,  for 
terra  cotta  ware,  and  for  roofing,  floor,  and  wall 
tile.  "These  figures,"  said  the  order,  "have  been 
reached  after  careful  investigation  and  represent 
rates  of  production  which  will  be  for  the  best  inter- 
ests of  the  necessary  Government  work  and  in 
general  for  the  interests  of  the  manufacturers  in- 
volved." ^  To  prevent  the  less  privileged  pro- 
ducers from  giving  attention  to  other  clay  prod- 
ucts, the  Fuel  Administrator  ordered  that  "no 
manufacturer  who  has  for  the  past  three  years  de- 
voted himself  to  a  given  line  exclusively  shall  use 
fuel  for  producing  any  other  line  without  written 
permission  from  the  Fuel  Administration."  ^  Pro- 
ducers of  common  window  glass  were  limited  to  50 
per  cent  of  their  output  for  either  1916  or  1917. 
Establishments  not  in  existence,  or  not  producing 
common  window  glass,  in  the  years  named,  were 
prohibited  from  consuming  fuel  "in  excess  of  that 
which  plants  of  similar  capacity  severally  required 

1  O.  B.,  April  19,  1918,  p.  13. 

»  Bus.  Dig.,  May  15,  1918,  p.  645. 


100        PROBLEMS  OF  RECONSTRUCTION 

to  produce  one  half  of  such  common  window  glass 
produced  by  them  during  either  of  the  years  named."  ^ 
In  the  case  of  cement  manufacturers,  the  agreement 
concerning  coal  supply  was  made  with  the  priority 
commissioner  and  other  representatives  of  the  War 
Industries  Board,  and  provided  that  producers 
would  be  accorded  preferential  treatment  on  con- 
dition that  they  limited  production  to  an  amount 
sufficient  to  meet  direct  and  indirect  war  require- 
ments or  others  of  exceptional  importance.^ 

Even  the  economies  mentioned  above  have  not 
proved  sufficient  to  afford  the  country  coal  supply 
adequate  to  all  its  important  needs.  It  has  been 
found  necessary  to  rate  industries  in  order  of  prior- 
ity and  to  apply  the  clamps  to  household  consumers. 
A  statement  from  the  Fuel  Administrator  in  June 
1918,  explained  that,  from  present  estimates,  it 
was  evident  that  sufficient  quantities  of  coal  could 
not  be  transported  to  all  parts  of  the  country  to 
satisfy  the  needs  of  all  consumers.  To  prevent 
interference  with  the  war  program  it  was  neces- 
sary, therefore,  to  recognize  that  certain  classes  of 
consumers  were  entitled  to  preference.  Priority  ar- 
rangements had  been  worked  out  in  January  and 
February,  in  connection  with  the  Fuel  Administra- 
tor's closing  order, ^  and  on  January  31,  the  Pres- 
ident approved  of  a  priority  list  as  applied  to  con- 

1  0.  B.,  Feb.  21,  1918,  p.  3.         ^  j^fi^  jm^g  20,  1918,  p.  2, 
»Com.  and  Fin.  Chron.,  Jan.  5,  1918,  p.  26;  Jan.  19,  1918.  p.  247; 

240;  250;  Jan.  26,  pp.  354,  355,  356;  Feb.  2,  1918,  pp.  448,  449,  450; 

Feb.  9,  1918,  p. 546;  Feb.  16,  1918,  p. 601. 


WAR   CONTROL  101 

sumers  of  fuel  oil.^  By  the  new  plan,  however,  such 
arrangements  have  been  made  permanent.  The 
program  as  announced  in  June  1918,  is  the  result 
of  cooperation  between  the  Fuel  Administration 
and  the  War  Industries  Board.  The  latter  body 
decides  what  consumers  are  to  have  preference, 
while  the  Fuel  Administration  controls  methods  of 
supply  and  records  of  industrial  needs.  Provision 
is  made  for  detailed  reports  covering  the  needs  of 
industrial  consumers  and  institutions,  and  state 
fuel  administrators  are  given  the  authority  to  con- 
trol the  distribution  of  coal  allotted  to  the  States. 
To  facilitate  the  assembling  of  preference  lists,  all 
consumers,  except  householders,  were  given  a  def- 
inite classification.  This  includes  railroads,  the 
Army  and  Navy,  together  with  other  departments 
of  the  Federal  Government,  state  and  county  de- 
partments and  institutions,  public  utilities,  retail 
dealers,  and  manufacturing  plants  on  the  War 
Industries  Board's  preference  list.  Preference  to 
consumers  in  the  list  is  worked  out  by  the  Board. 
By  this  arrangement,  the  entire  coal  situation  of 
the  country  is  brought  under  control.^ 

Finally,  the  necessity  for  rigid  economy  has  been 
brought  home  to  the  household  consumer.  Ac- 
cording to  the  plan  announced  in  July  1918,  the 
domestic  user,  also,  is  to  be  closely  watched.  A 
censorship  is  to  be  established  over  every  order 
received  by  dealers,  each  order  being  compared  with 
a  figure  "obtained    by    very    simple    yet    effective 

1  0.  B.,  Feb.  5,  1918,  p.  2.  « Ibid.,  June  18,  1918,  p.  12. 


102        PROBLEMS  OF  RECONSTRUCTION 

formulas  showing  the  rating  of  the  house  where  the 
coal  is  to  be  used."  ^  In  doubtful  cases,  inspectors 
are  to  examine  householder's  statements  with  ref- 
erence to  space  to  be  heated  and  the  kind  of  heat- 
ing system  employed.  The  domestic  consumer  is 
to  be  allowed  only  the  amount  of  coal  that  "scien- 
tific analysis  shows  is  necessary  if  the  requisite 
care  is  taken  in  the  heating  of  the  house."  ^  With 
an  insufficient  supply  for  winter  necessities  looming 
before  the  country,  it  is  deemed  important  to  in- 
augurate economies  wherever  possible.  Thus,  ac- 
cording to  the  plan,  the  amount  of  fuel  permitted 
to  the  consumer  will  not  be  the  amount  of  former 
years,  but  only  "so  much  as  is  scientifically  found 
sufficient  to  heat  his  house  to  68  degrees,  providing 
every  conservation  rule  has  been  obeyed."  ' 

The  impression  should  not  be  obtained  from  the 
above  discussion  that  fuel  administration  is  only  an 
isolated  part  of  the  program  of  war  control.  While 
the  saving  of  fuel  is  one  of  the  fundamental  objects, 
the  system  in  many  respects  is  consciously  de- 
vised to  supplement  the  work  of  other  boards  and 
committees  whose  purpose  is  to  regulate  the  supply 
of  essential  raw  materials,  capital,  labor,  and  ship- 
ping facilities.  Thus  the  Fuel  Administration  is 
only  one  cog  in  the  machinery  of  war  control  which 
includes  among  others  the  Food  Administration, 
Labor  Administration,  the  War  Industries  Board, 
War  Finance  Corporation,  and  the  War  Trade  Board. 

1  Bus.  Dig.,  July  24,  1918,  p.  133;  Com.  and  Fin.  Chron.,  July  13^ 
1918,  pp.  140  ff. ;   O.  B.,  July  8,  1918,  pp.  1  and  2. 

*  0.  B.,  July  8,  1918,  p.  2.  « Ihid.,  p.  1. 


CHAPTER  IV 

DEVELOPMENT  OF  WAR  CONTROL  (Continued) 
Labor 

Unlike  the  control  of  food  and  fuel,  the  war  labor 
program  has  been  developed  without  the  authority 
of  statute.  The  program,  therefore,  lacks  the  ele- 
ment of  compulsion  which  is  present  where  control 
is  enforced  by  law.  But,  at  that,  considerable  pres- 
sure can  be  exerted  to  secure  obedience  to  volun- 
tary measures.  Where  prices  of  fundamental  com- 
modities are  fixed  under  promise  of  employers  not 
to  reduce  wages  and  to  exert  themselves  to  main- 
tain the  output,  as  with  iron  and  steel,  copper  and 
aluminum,^  and  where  government  contracts  are 
let  under  condition  of  observance  of  certain  labor 
standards,  as  with  army  clothing,^  and,  in  addition, 
where  government  boards  and  committees  bring 
pressure  to  bear  through  the  grant  or  denial  of 
priority  privileges,'  fairly  adequate  means  of  control 
are  provided.  Besides,  with  boards  which  command 
public  respect  examining  the  relations  between 
laborers  and  capitalists  and  making  recommenda- 

1  Bus.  Dig.,  Oct.  17,  1917,  p.  107;  Jan.  16,  1918,  p.  98;  O.  B.,  Sept. 
25.  1917,  p.  2;  Nov.  16,  1917,  p.  3;  Dec.  29,  1917,  p.  1;  March  15, 
1918,  p.  3;  May  29,  1918,  p.  5;  May  31,  1918,  p.  3. 

2  O.  B.,  Aug.  25,  1917,  p.  1.         ^  Ibid.,  July  16,  1918,  p.  5. 

103 


104        PROBLEMS  OF  RECONSTRUCTION 

tions,  it  is  probable  that  neither  laborers  nor  em- 
ployers will  risk  the  responsibility  for  any  consid- 
erable disturbance  in  the  face  of  public  opinion 
which  would  quickly  condemn  them  for  lack  of 
patriotism.  The  labor  program,  therefore,  has 
grown  principally  on  the  voluntary  basis,  enforced 
by  agreements  which,  in  turn,  rest  largely  for  sup- 
port on  the  indirect  methods  named  above. 

It  might  be  thought  that  these  measures  are  more 
effective  with  employers  than  with  workmen,  but 
we  have  had  several  instances  where  federal  ad- 
ministrators have  made  clear  to  laborers  that  they 
must  conform  to  government  regulations.  On  a 
former  page  we  cited  Mr.  Garfield's  message  to  the 
miners.^  Equally  stern  was  the  method  of  Mr. 
McAdoo  in  dealing  with  the  strike  in  the  shops  at 
Alexandria,  Virginia.  He  made  it  emphatic  that 
the  Government  could  not  be  coerced  or  intimi- 
dated by  any  of  its  employees.  "I  cannot  believe," 
said  the  Director  General,  "that  these  men  knew 
what  they  were  doing.  They  are  all  employees  now 
of  the  United  States  Government.  They  are  not 
employees  of  any  railroad  corporation,  therefore  this 
was  a  strike  against  the  Government  of  the  United 
States.  It  is  the  first  time  in  the  history  of  our  Gov- 
ernment that  any  of  its  employees  have  attempted 
to  strike  against  their  Government.  Such  action  is 
incredible."  ^ 

,     ^  Cf.  supra,  p.  84. 

*  O.  B.,  May  31,  1918,  p.  3.  In  this  connection  note  Mr.  Burleson's 
attitude  towards  unions  in  the  Post  Office  service.  Cf.  Com.  and  Fin. 
Chron.,  Jan.  19,  1918,  pp.  256,  257. 


WAR  CONTROL  105 

In  its  early  stages,  the  labor  program  of  the  coun- 
try was  characterized  by  lack  of  comprehensive  pur- 
pose, and  even  by  lack  of  understanding  of  the 
larger  problems  involved/  nor  has  it  as  yet  grown 
to  include  all  the  work  of  government  and  war  in- 
dustries ;  but  many  of  the  divisions  of  a  compre- 
hensive plan  are  now  in  existence,  including  meas- 
ures for  housing  and  welfare  work,  machinery  for 
the  settlement  of  disputes  between  capitalists  and 
laborers  and  for  the  determination  of  labor  stand- 
ards, and  employment  service  for  unskilled  workers  ; 
and  some  progress  has  been  made  in  coordinating 
the  labor  problems  of  the  different  government  de- 
partments. The  larger  part  of  this  program  is  in 
the  hands  of  Mr.  William  B.  Wilson,  Secretary  of 
Labor,  who  is,  in  fact,  the  Labor  Administrator. 

As  in  other  fields  of  control,  numerous  problems 
were  presented  for  prompt  solution.  Some  were 
peculiar  to  the  war ;  others  were  inherent  in  the 
economic  system.  Regulation  itself,  by  limiting 
the  activity  of  less  important  industries,  tended  to 
deprive  some  men  of  an  occupation,  but  this  ill 
was  promptly  remedied  because  of  the  insatiable 
demand  for  men.  On  the  other  hand,  the  ques- 
tion of  supplying  the  new  war  industries  was  quite 
a  different  matter.  Hundreds  of  thousands  of  men 
with  particular  kinds  of  training  were  wanted  at 
once,  and  the  demand  has  continued  to  grow  with 

1  Jour.  Pollt.  Econ.,  XXVI,  pp.  42.5  ff.,  L.  C.  Marshall,  "The  War 
Labor  Program  and  its  Administration";  Quart.  Jour.  Econ.,  XXXII, 
p.  379. 


106        PROBLEMS  OF  RECONSTRUCTION 

the  expansion  of  the  war  program.  Incidentally, 
there  arose  the  problems  of  housing  laborers  in 
congested  areas  and  of  preventing  the  migration  of 
men  from  job  to  job  because  of  the  bidding  of 
employers  against  each  other. 

While  the  demand  was  increasing,  the  supply  was 
being  curtailed.  The  draft,  for  example,  has  re- 
moved several  million  men  from  productive  occu- 
pations. Meanwhile,  the  shortage  was  aggravated 
by  the  decline  of  immigration.  During  the  three 
years  ending  with  1916  the  net  inflow  was  50,070, 
125,900,  and  216,400,  or  an  average  annual  immi- 
gration of  about  130,800;  in  1912,  1913,  and  1914, 
the  net  immigration  had  been  401,860,  815,300,  and 
769,270  respectively,  or  an  annual  average  of  about 
662,100.^  An  increasing  demand,  therefore,  was 
met  by  a  decreasing  foreign  supply. 

Another  group  of  problems  arose  in  connection 
with  the  distribution  of  laborers.  Unfortunately, 
the  machinery  did  not  exist  for  the  performance  of 
this  work ;  thus  the  country  was  unprepared  for  the 
greatest  labor  readjustment  it  has  ever  been  called 
on  to  make.  However  much  there  may  have  been 
in  the  assertion  that  there  was  no  real  labor  shortage,^ 
at  least  the  contention  pointed  to  one  of  the  first 
problems  the  country  was  called  on  to  solve,  namely, 
that    of    shifting    laborers    promptly    to    industries 

'  First  Annual  Report  of  the  Secretary  of  Labor,  p.  96 ;  ibid.,  Second 
Annual  Report,  p.  149;  ibid..  Third  Annual  Report,  p.  139;  ibid.. 
Fourth  Annual  Report,  p.  177;   ibid..  Fifth  Annual  Report,  p.  122. 

*  Cf.  infra. 


WAR  CONTROL  107 

where  they  are  needed.  The  new  employment  serv- 
ice is  designed  to  do  this,  at  least  for  miskilled  labor. ^ 
The  new  labor  problems  involved  other  elements. 
Business  prosperity  invited  trouble,  because  it  was 
an  opportune  time  to  insist  on  higher  wages  and  to 
strengthen  the  position  of  the  unions.  Stimulated 
by  visions  of  unusual  profits,  workmen  were  spurred 
on  to  demand  a  share  in  the  increasing  productivity 
of  industry.  But  if,  on  the  one  hand,  they  were  lured 
to  such  activity,  on  the  other,  they  were  driven  to  it 
by  the  rising  cost  of  living.  Every  important  factor 
in  the  situation,  therefore,  made  for  labor  unrest. 
Several  collateral  problems  appeared  in  connection 
with  the  ones  just  mentioned.  The  abnormal  condi- 
tions revealed  clearly  the  lack  of  uniformity  of  wages 
and  conditions  even  in  related  occupations ;  mean- 
while, the  wretched  surroundings  in  some  of  the  new 
industrial  districts  promoted  unrest.  Apparently, 
the  feasible  way  of  meeting  the  situation  was  to  pro- 
vide authoritative  organizations  for  the  settlement 
of  differences  between  employers  and  men,  for  the 
standardization  of  working  conditions,  and  for  the 
improvement  of  surroundings.  These,  also,  were 
elements  in  the  new  labor  program.  Moreover,  if 
workmen  were  asked  to  limit  their  demands  for 
wages,  it  was  certain  that  they  would  present  the 
counter  proposal  for  the  limitation  of  profits  and 
the  regulation  of  prices.  Regulation  could  not  stop 
with  wages ;  it  had  to  include  other  factors  that 
bore  directly  or  indirectly  on  the  wage  situation; 

1 0.  B.,  Jan.  9,  1918,  p.  3. 


108        PROBLEMS  OF  RECONSTRUCTION 

nor  would  workers  be  satisfied  with  regulation  un- 
less it  applied  as  well  to  employers. 

Recommendations  covering  most  of  the  factors 
indicated  above  were  contained  in  the  report  of  the 
President's  Mediation  Commission  of  January  9, 
1918.  The  Commission  urged  the  elimination  of 
profiteering,  the  recognition  that  some  form  of  col- 
lective relationship  between  management  and  men 
is  indispensable,  the  establishment  of  continuous 
administrative  machinery  for  the  orderly  disposition 
of  industrial  issues  and  the  avoidance  of  an  at- 
mosphere of  contention,  unified  direction  of  the  labor 
administration  of  the  United  States  for  the  period 
of  the  war.  In  addition,  the  Commission  urged 
that  when  assured  of  sound  labor  conditions  and 
effective  means  for  just  redress  of  grievances,  labor 
in  turn  should  surrender  all  practices  which  tend 
to  restrict  maximum  output,  and  that  the  purposes 
of  the  Government,  and  its  methods,  should  be 
brought  home  to  the  fuller  understanding  of  labor.^ 

Undoubtedly,  when  the  United  States  entered 
the  war,  the  first  thought  of  American  labor  or- 
ganizations was  the  protection  of  their  standards, 
for  it  was  thought  that  war  injured  the  workmen's 
industrial  status.  From  labor's  point  of  view,  the 
earliest  policy  was  protection.  Possibly,  the  lead- 
ing purpose  in  inviting  representatives  of  English 
organizations  for  conference  in  the  United  States 
was  to  learn  how  they  had  met  the  problem.  Thus 
said  Mr.  Samuel  Gompers,  President  of  the  Amer- 

1  Bus.  Dig.,  Feb.  20,  1918,  p.  255;  O.  B.,  Feb.  11,  1918,  pp.  9  ff. 


WAR  CONTROL  109 

ican  Federation  of  Labor,  in  addressing  the  con- 
ference:  "While  it  is  true  and  may  be  necessary 
that  for  a  specific  limited  period  of  time  all  may  be 
required  to  make  heroic  sacrifices,  the  whole  history 
of  the  world  has  shown  that  in  the  long  run  this  form 
of  hysteria  is  detrimental  not  only  to  the  cause  at 
issue  but  also  to  the  protection  and  the  welfare  of 
the  great  masses  of  the  people."  ^  And  Mr.  James 
Thomas,  of  the  English  delegation,  said  at  the 
meeting  May  15:  "We  asked  the  Government  to 
see  that  whilst  men  were  called  upon  to  give  their 
life,  it  was  not  too  much  to  expect  other  people  to 
give  up  some  of  the  luxuries  that  they  were  enjoy- 
ing. Therefore,  I  am  giving  this  illustration  to 
show  that  consistent  with  our  desire  to  make  sac- 
rifices ourselves  we  naturally  and  jealously  safe- 
guarded the  interest  of  our  own  people  as  well  as  the 
community  by  insisting  that  the  sacrifice  should 
not  be  a  one-sided  one,  but  should  be  made  by  all 
classes  of  the  people."^  The  summary  of  infor- 
mation given  by  the  visitors  on  May  18  was  largely 
a  concrete  application  of  the  principle  contained  in 
these  two  addresses.^  The  idea  received  even  clearer 
statement  from  Mr.  Gompers  when  he  said  :  "Cer- 
tain fundamental  questions  have  required  atten- 
tion, one  being  the  effort  to  maintain  our  present 
economic  standards  —  legislative  and  otherwise  — 
until  such  a  time  as  the  Council  of  National  Defense 

*  British  Labor's  War  Message  to  American  Labor,  Sen.  Doc.  No. 
84,  65th  Cong.,  1st  Sess.,  p.  12.  » Ibid.,  p.  16. 

•  Com.  and  Fin.  Chron.,  June  10,  1917,  p.  2418. 


110        PROBLEMS   OF  RECONSTRUCTION 

shall  request  the  lowering  thereof  because  essential 
to  the  maintenance  of  democracy."  ^  It  is  inter- 
esting to  notice  that  President  Wilson  emphasized 
the  same  principle.  On  August  31,  1918,  in  inform- 
ing Mr.  Gompers  that  he  was  unable  to  attend  the 
Minneapolis  conference  of  the  Alliance  for  Labor 
and  Democracy,  he  said :  "I  myself  have  had  sym- 
pathy with  the  fears  of  the  workers  of  the  United 
States ;  for  the  tendency  of  war  is  toward  reaction, 
and  too  often  military  necessities  have  been  made 
an  excuse  for  the  destruction  of  laboriously  erected 
industrial  and  social  standards."  ^ 

It  still  remained  for  the  unions  to  formulate  con- 
cretely methods  for  working  out  the  principle  of 
protection.  This  was  done  at  the  meeting  of  the 
American  Federation  of  Labor  at  Buffalo,  Novem- 
ber 12  to  24.  The  Federation  urged  that  in  deter- 
mining wage  rates  other  things  than  the  cost  of 
living  are  to  be  considered,  and  that  the  existing 
wage  rate  in  an  establishment  should  be  consid- 
ered as  to  its  equity.  Moreover,  in  constituting 
boards  and  commissions  to  study  questions  of  em- 
ployment and  terms  of  labor,  the  Federation 
insisted  that  there  should  be  equality  of  representa- 
tion between  employers  and  wage  earners.  Fur- 
ther, that  all  new  arrangements  should  contain  a 
clause  announcing  that  the  right  to  organize  is 
inalienable  and  that  prevention  of  the  exercise  of 

'  O.  B.,  May  28,  1917,  p.  8. 

'  Report  of  Proceedings,  Thirty-Seventh  Annual  Convention  Amer- 
ican Federation  of  Labor,  pp.  96,  97. 


WAR  CONTROL  111 

this  right  by  the  employer  is  a  violation  of  these 
principles,  that  cooperation  should  exist  in  indus- 
tries, and  that  there  should  be  recognition  of  em- 
ployees as  a  group,  having  common  interests.  This 
was  a  prerequisite  of  cooperation.^ 

Apparently,  this  program  might  have  been  in- 
terpreted to  mean  something  more  than  the  main- 
tenance of  the  status  quo  during  the  war  period,  for 
if  the  rules  were  accepted  that  other  things  than  the 
cost  of  living  were  to  be  considered  in  settlement  of 
disputes,  and  if  proposed  new  wage  rates  were  to 
be  considered  on  their  equity,  the  unions  might 
have  availed  themselves  of  war  conditions  to  greatly 
strengthen  their  position.  An  equitable  adjust- 
ment might  have  been  interpreted  to  mean  not  only 
one  in  which  advances  kept  pace  with  the  increase 
in  expenses  of  living,  but  something  more,  because 
it  might  have  been  deemed  equitable,  since  de- 
mand for  labor  greatly  exceeded  supply,  that  the 
men  be  given  the  advantage  of  the  market  conditions 
for  labor.  Moreover,  the  insistence  on  the  inalien- 
able right  of  the  men  to  organize  as  a  fundamental 
principle  was  a  great  deal  more  than  the  mainte- 
nance of  pre-war  conditions,  since  many  employers 
did  not  recognize  that  right,  and  acquiescence  would 
have  meant  the  sudden  advance  of  union  prin- 
ciples and  the  strengthening  of  the  union  position 
as  the  result  of  the  war.  We  shall  see  presently  how 
these  principles  are  treated  by  the  War  Labor  Board. 

^  Report  of  Proceedings,  Thirty-Seventh  Annual  Convention  Amer- 
ican Federation  of  Labor,  pp.  167  ff. ;  Bus.  Dig.,  Nov.  28,  1917,  pp.  302  B. 


112        PROBLEMS  OF  RECONSTRUCTION 

On  the  employer's  side,  it  was  usually  urged  that 
neither  employers  nor  workmen  should  take  ad- 
vantage of  war  conditions  to  strengthen  their  re- 
spective positions.  Thus,  the  National  Industrial 
Conference  Board,  on  September  6,  1918,  at  the  in- 
vitation of  the  Council  of  National  Defense,  sub- 
mitted a  plan  of  settlement.  After  stating  that  dis- 
putes operate  to  the  advantage  of  the  enemy,  and 
that  industrial  workers  are  as  indispensable  to 
victory  as  soldiers  on  the  firing  line,  the  Board  urged 
the  Council  to  accept  the  principle  of  settlement  of 
the  Anthracite  Coal  Strike  Commission,  namely, 
*'That  no  person  shall  be  refused  employment  or  in 
any  way  discriminated  against  on  account  of  mem- 
bership or  non-membership  in  any  labor  organiza- 
tion ;  that  there  shall  be  no  discrimination  against, 
or  interference  with,  any  employee  who  is  not  a 
member  of  any  labor  organization  by  members  of 
such  organizations." 

In  order  to  clear  up  the  ambiguities  in  the  Coun- 
cil's statement  that  "employers  and  employees  in 
private  industries  should  not  attempt  to  take  ad- 
vantage of  the  existing  abnormal  conditions  to 
change  the  standards  which  they  were  unable  to 
change  under  normal  conditions,"  the  Industrial 
Conference  Board  urged  that  demands  for  increased 
wages  should  be  tested  by  the  prevailing  local 
standards  of  the  establishment  at  the  beginning  of 
the  war,  subject  to  modifications  to  cover  changes 
in  the  cost  of  living;  that,  as  applied  to  hours,  the 
standards  should  be  those  established  by  statutes, 


WAR  CONTROL  US 

or  prevailing  in  the  industries  at  the  beginning  of 
the  war,  subject  to  change  on  recommendation  of 
the  Council;  and  that  as  applied  to  "open"  and 
"closed"  shop  conditions,  "it  shall  be  understood 
and  agreed  that  every  employer  entering  the  period 
of  the  war  with  a  union  shop  shall  not  by  a  lockout 
or  other  means  undertake  to  alter  such  conditions 
for  the  duration  of  the  war,  nor  shall  any  com- 
bination of  workmen  undertake  during  a  like  period 
to  'close'  an  'open'  shop."  ^ 

Thus  the  principles  were  stated.  The  most  press- 
ing problem,  as  seen  at  this  stage,  was  to  rid  indus- 
try of  conflicts  arising  out  of  questions  of  wages, 
hours,  and  working  conditions,  and  most  of  the 
emphasis  during  the  early  months  of  the  war  was 
on  this  feature.  The  Council  of  National  Defense 
was  not  organized  for  this  purpose,  but  it  could 
take  the  initiative  in  providing  the  general  means  of 
settlement.  The  principal  labor  committee  of  the 
Advisory  Commission  was  the  Committee  on  Labor, 
of  which  Mr.  Gompers  was  chairman,  and  cooper- 
ating with  it  were  the  sub-committees  on  mediation 
and  conciliation,  wages  and  hours,  on  women  in  in- 
dustry, and  on  welfare  work.^  As  the  name  of  the 
larger  organization  indicates,  the  function  of  these 
cooperating  bodies  was  to  advise  the  Council. 

The  earliest  plans  for  the  adjustment  of  disputes, 
inaugurated  in  the  early  part  of  August  1917,  were 
designed  to  operate  in  particular  groups  or  classes 

1  Com.  and  Fin.  Chron.,  Sept.  29,  1917,  pp.  1271,  1272. 
*  First  Annual  Report  of  the  Council  of  National  Defense,  pp.  113  £f 
I 


114        PROBLEMS  OF  RECONSTRUCTION 

of  industries,  with  little  thought  of  a  comprehen- 
sive program  which  should  include  all  the  important 
elements  affecting  the  labor  situation  and  which 
should  cover  all  the  war  activities  of  the  country. 
It  was  not  until  January  that  the  larger  plan  began 
to  take  form.  Thus,  separate  bodies  were  ap- 
pointed to  settle  troubles  in  plants  having  con- 
tracts with  the  Government,  among  longshoremen 
and  their  employers,  in  the  shipbuilding  industry, 
and  in  the  establishments  of  the  Government.  Nor 
was  there  anything  particularly  new  in  the  prin- 
ciples involved  in  the  settlements,  except  that  a 
little  more  care  was  taken  to  prevent  disputes  from 
arising,  and  the  new  arrangements  anticipated  strikes 
and  lockouts  by  providing  in  advance  agreements 
which  in  all  likelihood  would  prevent  their  occurrence. 
On  August  9,  1917,  the  Council  of  National  De- 
fense announced  its  intention  of  appointing  a  Labor 
Adjustment  Commission  to  decide  issues  in  private 
plants  working  on  government  contracts.^  It  was 
composed  of  nine  members,  three  each  representing 
the  Government,  employers,  and  workmen.  The 
Commission  was  empowered  to  appoint  committees, 
provided  these  were  composed  of  the  three  elements 
represented  in  the  Commission.  All  contractors 
and  subcontractors  were  subject  to  the  eight  hour 
law  of  June  19,  1912,  or  March  3,  1913.  Wages 
were  to  be  computed  on  a  basic  day  rate  of  eight 
hours'  work  with  overtime  rates  at  not  less  than 

»  Com.  and  Fin.  Chron.,  Aug.  11,  1917,  p.  566;  O.  B.,  Aug.  10,  1917, 
p.  2. 


WAR  CONTROL  115 

time  and  one  half  for  overtime.  The  Department  of 
Labor  of  its  own  initiative  could  appoint  mediators, 
who  were  to  endeavor  to  bring  about  a  satisfactory 
settlement.  In  the  event  of  failure,  the  issue  was 
to  be  brought  before  the  Commission.  The  compel- 
ling element  was  found  in  the  provision  that  "every 
contractor  and  subcontractor  shall  agree  to  accept 
and  abide  by  the  decision  of  the  Labor  Adjust- 
ment Commission  or  labor  adjustment  committees, 
as  the  case  may  be,  and  every  worker  accepting  em- 
ployment in  any  plant  within  the  jurisdiction  of  the 
Adjustment  Commission  shall  do  so  with  the  definite 
understanding  and  agreement  that  he  will  accept 
and  abide  by  the  decisions  of  the  Adjustment  Com- 
mission or  the  adjustment  committee,  as  the  case 
may  be,  in  the  settlement  of  any  question  affecting 
labor  submitted  to  it  for  adjudication."  ^ 

On  August  10,  an  inter-departmental  committee 
was  announced,  whose  function  was  to  adjust  the 
scale  of  wages  of  employees  in  government  plants. 
It  was  composed  of  representatives  of  the  Depart- 
ments of  Navy,  Army,  and  Labor.  In  determining 
wages  for  the  next  twelve  months,  the  committee 
announced  that  it  would  take  as  a  basis  for  govern- 
ment pay  the  average  wage  paid  in  any  given  com- 
munity. In  some  instances,  the  United  States  was 
paying  more,  in  others  less,  than  the  average  rate. 
It  was  expected  that  this  policy  would  tend  toward 
an  equalization  of  the  amount  paid  by  the  Govern- 
ment and  private  interests.^ 

1  Cora,  and  Fin.  Chron.,  Au«.  11,  1917.  p.  566. 

2  Ibid.,  Aug.  18,  1917,  p.  6GC. 


116        PROBLEMS  OF  RECONSTRUCTION 

The  threatened  strike  among  longshoremen  was 
the  occasion  for  the  appointment,  August  29,  of  a 
commission  to  settle  disputes  between  workmen  of 
this  description  and  their  employers.  As  with  the 
Adjustment  Commission  outlined  above,  provision 
was  made  for  representation  of  the  Government, 
employers,  and  men,  with  the  addition  of  a  member 
from  the  Committee  on  Shipping  of  the  Council  of 
National  Defense.  Besides  the  national  body,  there 
were  to  be  local  commissions  in  each  important  port, 
composed,  like  the  central  body,  of  representatives 
of  the  various  interests.  The  memorandum  of 
agreement  provided  for  negotiation  on  the  basis  of 
the  union  scale  of  wages  in  force  at  each  port  on 
August  1,  1917;  consideration  was  to  be  given  to 
special  circumstances  arising  since  that  date  which 
might  affect  wages,  hours,  and  working  conditions. 
All  differences  which  arose  in  particular  ports  were 
to  be  settled,  if  possible,  by  the  local  commission. 
If  that  failed,  the  case  could  be  taken  for  review  to 
the  National  Commission.  At  all  events,  the  work  was 
to  continue  without  interruption  pending  the  action  of 
both  local  and  national  bodies.  Finally,  all  adjust- 
ments of  wages,  hours,  and  conditions  by  the  National 
Commission  were  made  binding  on  all  parties.^ 

In  shipbuilding,  also,  as  in  the  other  industries 
discussed  above,  the  method  followed  was  to  pro- 
vide for  settlement  without  reference  to  any  gen- 
eral labor  plan.  A  body,  —  the  Shipbuilding  Labor 
Adjustment  Board,  —  was  constituted  to  deal  with 

1  Louis  B.  Wehle,  Quart.  Jour.  Econ.,  XXXII,  pp.  130,  140. 


WAR  CONTROL  117 

this  particular  industry.  Indeed,  the  plan  was 
worked  out  hastily  so  that  it  might  be  available  for 
the  settlement  of  pending  strikes.  According  to  the 
agreement  of  August  20,  the  new  organization  was 
to  be  composed  of  three  members  representing  the 
public,  the  workmen,  and  the  Fleet  Corporation. 
Provision  was  made  for  an  examiner  in  each  of  the 
geographical  districts  selected  jointly  by  employers 
and  representatives  of  labor  organizations.  The 
duty  of  this  official  was  to  settle  the  disputes  locally 
if  possible,  otherwise  to  refer  them  to  the  national 
body.^  The  Adjustment  Board  apparently  had 
little  or  no  influence  in  the  settlement  of  the  San 
Francisco  strike.  The  trouble  had  been  pending 
since  August  14,  when  the  strike  was  formally  voted, 
but  was  delayed  through  the  influence  of  some  of 
the  leaders  until  September  18 ;  final  settlement 
was  not  reached  until  September  26.  According  to 
the  press  dispatches,  the  principal  factors  respon- 
sible for  the  adjustment  were  the  willingness  of  the 
Government  to  go  any  length  to  prevent  delays  in 
the  shipbuilding  program,  and  an  offer  by  the 
Shipping  Board  to  share  the  added  expense  to  the 
shipbuilders,  caused  by  the  adoption  of  the  new 
wage  scale.  Accordingly,  the  Government's  pro- 
posal, which  the  San  Francisco  shipbuilders  later 
accepted,  provided  that  it  would  pay  half  of  any 
wage  increase  where  the  companies  did  not  make  in  ex- 
cess of  10  per  cent  profit  on  the  commandeered  ships.^ 

»  Louis  B.  Wehle,  Quart.  Jour.  Econ..  XXXII.  pp.  128,  137. 
«  Com.  and  Fin.  Chron..  Sept.  29,  1917,  p.  1267. 


118        PROBLEMS  OF  RECONSTRUCTION 

During  the  months  immediately  succeeding  this 
settlement  the  Adjustment  Board  took  up  its  task, 
and  has  since  met  with  a  good  measure  of  success 
in  the  settlement  of  disputes.^  On  April  19,  1918, 
the  Board  announced  material  changes  in  its  rule 
of  practice.  One  of  the  new  problems  attacked  was 
to  prevent  shipbuilding  artisans  from  drifting  from 
place  to  place  in  quest  of  more  favorable  oppor- 
tunities, but  this  task  could  only  be  accomplished 
by  standardizing  wages  and  conditions  of  work. 
The  Board  was  of  the  opinion  that  the  plants  on  the 
Great  Lakes  and  northern  Atlantic  seaboard  were 
in  the  same  competitive  area,  and  that  substantial 
justice  would  be  done  the  men  if  the  conditions 
within  these  regions  were  made  uniform.  Thus,  it 
was  decided  to  establish  for  the  yards  on  the  Great 
Lakes  the  same  wage  scale,  hours,  and  other  regula- 
tions that  prevailed  in  the  East.  The  new  scale  ad- 
vanced substantially  the  pay  of  artisans  in  a  num- 
ber of  the  Lake's  crafts,  but  to  avoid  trouble  due 
to  possible  reductions,  it  was  provided  that  the 
wages  of  no  individual  employee  should  be  lowered 
as  a  result  of  the  change.  The  new  arrangement  was 
made  retroactive  to  April  1,  except  where  otherwise 
agreed  upon  in  writing  by  the  yard  owners  and  their 
employees.^ 

With  reference  to  the  settlements  of  disputes,  the 
new  plan  provided  for  the  selection  of  three  mem- 
bers by  each  craft  by  secret  ballot.     These  men 

1  Quart.  Jour.  Econ.,  XXXII,  pp.  339  £F. 
»  O.  B.,  April  26,  1918,  pp.  12,  13. 


WAR  CONTROL  119 

constituted  a  shop  committee.  Grievances  were 
first  taken  to  the  shop  foreman  or  general  foreman, 
thence  to  higher  officials  of  the  company,  and  ul- 
timately, in  the  event  of  failure  lower  down,  to  an 
examiner  appointed  by  the  shipbuilding  Labor  Ad- 
justment Board. ^ 

The  same  general  method  employed  in  the  ship- 
building industry  and  with  the  longshoremen, 
namely,  the  settlement  of  labor  problems  for  the 
industry,  without  reference  to  a  general  plan,  was 
followed  also  with  the  railroads.  Even  the  re- 
cruiting program  for  unskilled  labor  was  not  applied 
to  this  industry.^ 

In  a  statement  of  February  21,  Director-General 
McAdoo  defined  the  position  of  the  Government 
with  reference  to  railway  labor.  He  stated  that  the 
broad  question  of  wages  and  hours  would  be  passed 
upon  and  reported  to  the  Director-General  as 
promptly  as  possible  by  the  Railroad  Wage  Com- 
mission. Pending  its  investigation,  all  requests 
involving  a  revision  of  schedules  and  general  ques- 
tions affecting  wages  and  hours  would  be  held  in 
abeyance.  In  any  event,  should  an  advance  in 
wages  be  granted  on  the  basis  of  the  Commission's 
report,  it  would  be  retroactive  to  January  1,  1918.^ 
The  statement  added  that  "no  discrimination  will 
be  made  in  the  employment,  retention,  or  conditions 
of  employment  of  employees  because  of  member- 
ship or  non-membership  in  labor  organizations."  ^ 

J  O.  B.,  April  26,  1918,  p.  12.  2  Cf.  infra. 

*  Mon.  Rev.  U.  S.  Bu.  of  Lab.  Sta.,  April,  1918,  p.  110.         *  Ibid. 


120        PROBLEMS  OF  RECONSTRUCTION 

With  reference  to  labor,  the  first  important  step 
taken  by  the  Railroad  Administration  was  the  ap- 
pointment of  a  Railroad  Wage  Commission  about 
January  18.  This  body  was  authorized  to  study 
the  whole  field  of  railway  labor  in  the  United  States, 
compensation  of  persons  in  the  railroad  service,  re- 
lation of  railway  wages  to  wages  in  other  industries, 
conditions  in  different  parts  of  the  country,  special 
emergencies  affecting  wages  because  of  the  war,  and 
the  relation  between  different  classes  of  railway 
labor. ^  The  appointment  of  the  commission  was 
the  outcome  of  a  large  number  of  complaints  and 
demands  of  employees  pending  before  the  managers 
for  some  time  past. 

In  March,  the  Railway  Board  of  Adjustment  was 
created,  largely  for  the  purpose  of  settling  con- 
troversies. This  board  was  composed  of  eight 
members,  four  representing  the  railroads,  selected 
by  the  regional  directors,  and  paid  by  the  railroads, 
and  four  representing  the  brotherhoods  and  com- 
pensated by  them.  Disagreements  were  to  be 
handled  in  the  first  instance  by  local  committees  of 
employees  and  local  oflScers  of  the  roads ;  in  case  of 
failure  to  arrive  at  a  settlement,  the  issue  was  to  be 
transferred  up  the  line  to  the  Director  of  the  Divi- 
sion of  Labor  of  the  Railroad  Administration,  who,  in 
turn,  presented  the  case  to  the  Board  of  Adjustment. 
If  a  majority  vote  could  not  be  obtained  from  this 
body,  final  decision  rested  with  the  Director-General.^ 

1  O.  B.,  Jan.  19,  1918,  p.  1 ;  Com.  and  Fin.  Chron.,  Jan.  5,  1918,  p.  38; 
Jan.  26,  1918,  p.  365.  *  O.  B.,  March  25,  p.  2. 


WAR  CONTROL  121 

The  Railroad  Wage  Commission  issued  its  report 
on  May  8,  recommending  advances  which  totaled 
upwards  of  $300,000,000  and  covered  upwards  of 
2,000,000  employees.  The  reason  assigned  for  the 
advance  was  to  adjust  wages  to  the  new  cost  of 
living.^  The  Director-General's  order  of  May  26 
embodied  most  of  the  recommendations  of  the  Com- 
mission. Two  principles  were  clearly  recognized, 
namely,  the  basic  eight  hour  day,  and  the  pay- 
ment of  equal  wages  to  negroes  and  white  employees 
performing  the  same  work.  The  increase  affected 
principally  the  shop  trades,  such  as  machinists, 
boilermakers,  and  blacksmiths.  A  minimum  rate 
of  55  cents  an  hour  was  established,  and  modifica- 
tions made  which  increased  the  pay  of  common 
laborers  1^  cents  an  hour  over  the  rate  of  Decem- 
ber 31,  1917,  in  case  the  recommendations  of  the 
Commission  were  less  than  that  amount.^ 

The  methods  discussed  above  refer  to  particular 
industries  or  groups  of  industries.  While  the  plan 
covered  an  important  part  of  the  field,  it  left  labor 
conditions  in  many  industries  unregulated,  and  at 
that,  it  emphasized  only  one  element  of  control, 
namely,  the  relations  between  employers  and  men. 
The  necessity  existed  for  a  plan  which  not  only  as- 
sured industrial  peace,  but  at  the  same  time  brought 
within  the  scope  of  administration  all  the  important 
factors   which   affected  the  country's   war  produc- 

1  Bus.  Dig.,  May  15,  1918,  p.  G53. 

^Ibid..  June  5,  1918.  pp.  758-759;  Com.  and  Fin.  Chron.,  May  11, 
1918,  p.  1972;  Ma^y  18,  1918,  p.  2086;  June  1,  1918,  p.  2267. 


122        PROBLEMS  OF  RECONSTRUCTION 

tion   plans ;   hence  the   demand   for   a  larger  pro- 
gram. 

On  January  8,  President  Wilson  announced  his 
approval  of  a  program  of  war  labor  administration 
which  had  previously  been  submitted  by  Secretary 
Baker,  as  chairman  of  the  Council  of  National  De- 
fense, and  by  Secretary  of  Labor  Wilson.  Six 
groups  of  activities  were  outlined.  The  new  plan 
included,  first,  means  of  furnishing  an  adequate  and 
stable  supply  of  labor  to  the  war  industries,  which, 
in  turn,  required  a  satisfactory  system  of  labor 
exchanges,  methods  for  training  workers,  an  agency 
for  determining  priority  demands,  and  agencies  to 
administer  the  dilution  of  skilled  labor.  Second, 
machinery  to  provide  for  the  immediate  and  equi- 
table adjustment  of  disputes  in  accordance  with  prin- 
ciples to  be  agreed  upon  by  laborers  and  capitalists. 
A  third  factor  included  methods  of  safeguarding  the 
conditions  of  labor  in  the  production  of  war  products, 
with  particular  reference  to  sanitary  conditions  in 
the  establishments,  safety  provisions,  and  care  of 
women  and  children.  The  fourth  group  of  activities 
covered  conditions  of  living,  including  housing  and 
transportation.  In  addition,  the  new  plan  called 
for  an  agency  to  assemble  data  for  the  information 
of  officials  in  perfecting  their  labor  plans ;  and 
finally,  an  information  and  educational  division,  the 
function  of  which  was  to  develop  public  sentiment, 
secure  an  exchange  of  information  between  the  de- 
partments of  the  labor  administration,  and  to  pro- 
mote in  industrial  plants  "local  machinery  helpful  in 


WAR  CONTROL  123 

carrying  out  the  national  labor  program."  ^  Pres- 
ident Wilson  requested  the  Secretary  of  Labor  to 
take  charge  of  the  proposed  labor  administration 
and  to  select  the  appropriate  means  for  carrying  it 
out. 

The  upshot  of  this  plan,  therefore,  was  to  put 
into  the  hands  of  Secretary  Wilson  the  task  of 
formulating  a  broad  labor  policy  for  the  country. 
The  Secretary  promptly  called  to  his  assistance  an 
Advisory  Council  to  work  out  the  details  of  the  new 
administration.^  He  also  urged  the  appointment  of 
a  War  Labor  Conference  Board,  composed  of  rep- 
resentatives of  laborers  and  employers,  to  formulate 
principles  for  the  settlement  of  disputes.  This 
body  reported  March  29,  stating  principles  and 
recommending  the  creation  of  a  National  War  Labor 
Board  to  deal  with  the  questions  involved.  The 
leading  products  of  the  labor  policy  inaugurated  in 
January  are  summarized  in  the  activities  of  the 
War  Labor  Board  approved  by  the  President  April 
8,  1918,  and  of  the  War  Labor  Policies  Board  in- 
augurated about  May  20.' 

The  principles  mentioned  above  are  a  sort  of 
constitution  to  which  all  decisions  under  the  juris- 
diction of  the  Labor  Board  must  be  referred  for 
validation.  Undoubtedly,  neither  employers  nor 
laborers  are  fully  satisfied  with  these  measures,  but 

1  Mon.  Rev.  U.  S.  Bu.  Lab.  Sta.,  Feb.  1918.  pp.  78  ff. ;  O.  B.,  Jan.  9. 
1918,  p.  3;   Bus.  Dig.,  Jan.  16,  1918,  p.  99. 

*0.  B.,  Jan.  16.  1918,  p.  8;  Com.  and  Fin.  Chron..  Jan.  26,  1918, 
p.  357;  Jour.  Polit.  Econ..  XXVI,  pp.  442  ff.  «  Cf.  infra,    j 


124        PROBLEMS  OF  RECONSTRUCTION" 

since  many  of  the  leaders  of  industry  and  labor 
have  given  their  assent  to  the  plan,  it  commands 
their  support.  It  has  the  advantage  of  giving  a 
uniform  policy  of  settlement  which  is  workable  at 
least  during  war  times,  and,  of  course,  to  the  ex- 
tent that  it  succeeds,  it  has  the  great  advantage  of 
preventing  industrial  disturbances. 

The  four  principles  stated  by  the  Conference 
Board  were  the  following : 

First.  "The  right  of  workers  to  organize  in 
trade  unions  and  to  bargain  collectively  through 
chosen  representatives  is  recognized  and  affirmed. 
This  right  shall  not  be  denied,  abridged,  or  inter- 
fered with  by  the  employers  in  any  manner  whatso- 
ever." 

Second.  "The  right  of  employers  to  organize  in 
associations  of  groups  and  to  bargain  collectively 
through  chosen  representatives  is  recognized  and 
affirmed.  This  right  shall  not  be  denied,  abridged, 
or  interfered  with  by  the  workers  in  any  manner 
whatsoever." 

Third.  "Employers  should  not  discharge  workers 
for  membership  in  trade  unions,  nor  for  legitimate 
trade  union  activities." 

Fourth.  "The  workers,  in  the  exercise  of  their 
right  to  organize,  shall  not  use  coercive  measures  of 
any  kind  to  induce  persons  to  join  their  organiza- 
tions, nor  to  induce  employers  to  bargain  or  deal 
therewith."  ^ 

In   explanation   of   these   principles   the   Confer- 

1  O.  B.,  April  1,  1918,  p.  7. 


WAR  CONTROL  125 

ence  Board  said  that  in  establishments  where  union 
shops  exist,  the  same  shall  continue,  and  union 
standards  as  to  wages,  hours,  and  other  conditions 
shall  be  maintained.  On  the  other  hand,  in  estab- 
lishments where  union  and  non-union  men  and 
women  worked  together,  and  where  the  employers 
meet  only  with  employees  or  their  representatives, 
the  continuance  of  such  conditions  was  not  to  be 
deemed  a  grievance.  But  this  declaration  was  not 
to  be  interpreted  as  denying  the  right  or  discourag- 
ing the  practice  of  forming  unions.^ 

The  functions  and  powers  of  the  National  War 
Labor  Board  were  to  bring  about  a  settlement  by 
mediation  and  conciliation  of  controversies  arising 
in  industries  necessary  for  the  effective  prosecution 
of  the  war;  to  do  the  same  thing  for  similar  con- 
troversies in  other  fields  of  national  activity  where 
delays  might  be  detrimental  to  production ;  to  sum- 
mon the  parties  to  the  controversy  for  hearing  and 
action ;  and  to  provide  the  machinery  for  settle- 
ment. This  machinery  included,  in  addition  to  the 
National  War  Labor  Board,  local  committees  chosen 
by  the  Board,  resident  in  important  industrial 
centers.  Disputes  which  local  committees  could 
not  decide  were  to  be  referred  to  the  national  body, 
and  in  the  event  of  failure  here  to  secure  unanimous 
decision,  the  Board  was  to  choose  an  umpire  by 
"unanimous  vote";  failing  such  a  choice,  the  name 
of  the  umpire  was  to  be  drawn  from  a  list  of  ten 
"suitable  and   disinterested  persons    to    be   nomi- 

1  O.  B.,  April  1,  1918,  p.  7. 


126        PROBLEMS  OF  RECONSTRUCTION 

nated  for  the  purpose  by  the  President  of  the  United 
States."  ^  It  will  be  recalled  that  on  April  8, 
President  Wilson  formally  approved  of  this  policy 
and  appointed  former  President  William  H.  Taft 
and  Hon.  Frank  P.  Walsh  joint  chairmen  of  the 
new  board  to  represent  the  public,  and  five  mem- 
bers each  to  represent  employers  and  workmen.* 
On  July  12,  the  President  announced  the  names  of 
ten  persons  who  were  to  act  as  umpires.' 

To  the  student  of  reconstruction  problems,  the 
most  important  question  arising  in  connection  with 
this  program  is  how  the  new  arrangements  have 
changed  the  old  system.  Mr.  Walsh  was  of  the 
opinion  that  the  program  is  an  important  concession 
to  the  principles  of  industrial  democracy.  Com- 
menting on  the  War  Labor  Board  and  its  prospec- 
tive activities,  he  said:  *'The  local  committees  of 
mediation  and  conciliation  of  the  National  War 
Labor  Board  will  constitute  the  forums  of  indus- 
trial peace  in  the  United  States.  .  .  .  These  princi- 
ples secure  to  the  employer  maximum  production 
and  guarantee  to  the  worker  his  right  to  organization, 
healthy  growi:h  of  the  principles  of  democracy  as 
applied  to  industry,  and  the  highest  protection  of 
his  economic  welfare."  * 

It  is  certainly  true  that  the  War  Labor  Board  has 
emphatically  affirmed  the  right  of  the  men  to  or- 
ganize, and  has  given  strong  support  to  collective 
bargaining,  although  this  principle  is  not  as  fully 

1  O.  B.,  April  1.  1918  p.  1.  '  Ibid.,  April  10,  1918,  p.  S. 

« Ibid.,  July  15,  1918,  p.  1.  *  Ibid..  May  18,  1918,  p.  6. 


WAR  CONTROL  127 

recognized  as  the  unions  desire,  since  it  is  not  with 
the  unions  that  employers  are  asked  to  deal,  but 
with  organizations  of  workmen  within  the  shop. 
Indeed,  while  the  employer  is  not  to  deny  the 
right  of  the  men  to  organize,  nor  to  prevent  them 
from  doing  so,  he  is  not  required  to  recognize  the 
union. ^  The  Western  Union  Telegraph  case  illus- 
trates this  point.  Mr.  Taft,  at  the  suggestion  of 
Mr.  Walsh,  submitted  to  the  company  the  proposi- 
tion that  the  company  receive  "a  committee  of  its 
own  men  only  who  desire  individually,  or  in  a  group 
composed  of  the  employees,"  to  present  requests 
for  betterment  of  conditions,  and  that  "the  Western 
Union  should  not  be  required  in  any  way  to  deal 
with  the  union  or  to  recognize  it."  ^  In  other 
respects,  the  new  plan  seems  to  make  larger  conces- 
sions than  are  actually  obtained.  Thus,  the  unions 
would  undoubtedly  insist  that  much  of  the  force 
is  taken  out  of  collective  bargaining  by  denying  them 
the  use  of  coercive  measures.  The  policy,  therefore, 
is  only  a  part  concession  to  union  principles ;  on  the 
other  hand,  as  we  have  already  indicated,  the  new 
plan  subtracts  somewhat  from  the  employer's  former 
position  of  strength  because  it  grants  to  the  men 
the  right  to  organize,  and  many  have  availed  them- 
selves of  this  grant.  Both  the  plan  and  principles 
bear  the  marks  of  compromise  in  which  each  side, 
at  least  for  the  period  of  the  war,  has  yielded  some- 
thing for  the   sake   of   industrial  peace.     The  full 

'  O.  B.,  April  1.  1918,  pp.  1  and  7. 
» Ibid..  June  4,  1918,  p.  6. 


128        PROBLEMS  OF  RECONSTRUCTION 

significance  of  the  policies  of  the  War  Labor  Board 
cannot  be  known  until  its  measures  are  more  fully 
developed. 

In  the  recent  work  of  the  Board,  we  have  some  in- 
dications of  the  directions  in  which  the  decisions  will 
run.  In  a  controversy  at  the  plant  of  the  General 
Electric  Company  at  Pittsfield,  Massachusetts,  the 
action  of  the  Board  required  the  company  to  aban- 
don the  system  of  individual  contracts.  It  was  an- 
nounced that  the  staff  of  the  Board  would  devise  a 
system  of  elections  by  which  the  workers  could 
choose  committees  to  represent  them  in  dealing  with 
the  company.^  In  a  wage  case,  involving  upwards 
of  3000  workers  at  Waynesboro,  Pennsylvania,  the 
Board  fixed  40  cents  an  hour  as  the  minimum  rate 
to  be  paid  to  any  class  of  men,  including  com- 
mon laborers,  and  announced  that  it  had  under 
consideration  the  determination  of  the  living  wage 
which,  under  its  principles,  must  be  the  minimum 
rate  to  permit  the  worker  and  his  family  to  sub- 
sist in  health  and  reasonable  comfort.^  Thus  far, 
the  Board  has  declined  to  attack  the  problem  of 
the  national  minimum.  According  to  an  announce- 
ment about  August  1,  the  policy  to  be  adopted  is  to 
settle  the  minimum  in  each  particular  case  as  it  arises.^ 

The  notable  case  in  which  the  Labor  Board  has 
failed  to  obtain  a  settlement  is  the  instance  of  the 
Western  Union  Telegraph  Company  referred  to 
above.     The  failure,  no  doubt,  hastened  the  taking 

1  O.  B.,  July  1.  1918.  p.  2.  «  Ibid.,  July  15,  1918,  p.  8, 

» Ibid..  Aug.  1,  1918,  p.  1. 


WAR  CONTROL  129 

over  of  the  company  by  the  Government.  Funda- 
mental principles  were  involved,  as  is  indicated  by 
the  statement  of  both  sides  to  the  controversy. 
"The  company,"  according  to  Mr.  Newcomb  Carle- 
ton,  the  president,  "also  offered  to  cooperate  with 
the  War  Labor  Board  in  the  development  of  an  or- 
ganization to  be  confined  to  the  Western  Union  em- 
ployees, thus  giving  the  employees  an  opportunity 
for  collective  bargaining,  and  agreeing  to  submit  all 
differences  between  the  company  and  this  organ- 
ization to  arbitration  by  the  National  War  Labor 
Board."  ^  To  this  policy  Mr.  Taft  replied:  "I  do 
not  think  our  principles  include  the  closed  non- 
union shop  in  the  status  quo  to  be  maintained.  .  .  . 
You  deny  to  a  majority  of  your  employees  a  right 
to  join  a  labor  union."  ^  The  Western  Union  was 
willing  to  permit  an  organization  within  the  com- 
pany and  collective  bargaining  with  this,  but  refused 
to  deal  with  an  outside  organization ;  the  Board  in- 
sisted on  the  right  of  the  men  to  organize,  but  it 
did  not  urge  the  company  to  deal  with  the  union. 

The  other  organization  to  which  was  entrusted 
the  task  of  working  out  the  broad  outlines  of  a 
labor  policy  for  the  country  is  the  War  Labor  Policies 
Board.  The  distinction  between  the  activities  of 
the  two  organizations  is  made  clear  by  Mr.  Felix 
Frankfurter,  chairman  of  the  Policies  Board.  The 
War  Labor  Board,  according  to  this  exposition,  is 
"judicial  and  legislative-judicial  in  the  sense  that  it 

^  The  Western  Union  and  the  War  Labor  Board  (published  by  the 
company),  p.  10;   O.  B.,  June  4,  1918,  p.  6.  'Ibid. 

K 


130        PROBLEMS  OF  RECONSTRUCTION 

will  be  a  court  of  appeal  where  one  or  more  of  its 
enunciated  principles  are  involved  in  dispute,  even 
as  between  appellant  and  any  branch  or  board  of 
the  Government,  and  legislative  at  such  times  as 
the  establishment  of  a  new  principle  to  govern  in- 
dustrial relations  is  in  contemplation.  The  so- 
called  Taft- Walsh  board  is  a  court  of  adjustment  of 
differences  between  employer  and  employee,  with 
final  jurisdiction  in  cases  where  its  governing  prin- 
ciples are  in  question."  ^ 

The  Policies  Board,  on  the  other  hand,  is  princi- 
pally an  administrative  body.  Its  functions  are  to 
determine  directly  for  war  industries,  and  indirectly 
for  non-war  industries,  questions  involving  the  dis- 
tribution of  labor,  wages,  hours,  and  working  con- 
ditions. In  case  of  government  production,  its 
decisions  are  executed  by  the  various  production 
departments  of  the  Government.  The  execution  is 
direct,  also,  for  industries  involved  in  war  work. 
For  non-war  industries,  the  regulations  are  worked 
out  through,  the  War  Industries  Board,  which,  by 
virtue  of  its  control  over  the  flow  of  essential  raw 
materials,  can  bring  effective  pressure  to  bear  on 
such  industries.  Thus,  the  Policies  Board  num- 
bers among  its  duties  the  development  of  plans  for 
a  unified  administration,  and  brings  together  and 
coordinates  the  methods  of  the  various  government 
departments  in  dealing  with  labor  problems  related 
to  production.  It  is  not  concerned  with  disagree- 
ments between  employers  and  men,  since  the  gov- 

1  O.  B.,  May  17,  1918,  p.  13;  ibid.,  June  8,  1918,  p.  13. 


WAR  CONTROL  131 

eminent  departments  represented  on  the  Board  are 
themselves  large  employers  of  labor.^ 

One  of  the  earliest  tasks  of  the  new  board  was  to 
standardize  wages  of  men  employed  in  the  service 
of  the  United  States.  In  the  latter  part  of  June  the 
Policies  Board  passed  a  resolution  to  the  effect  that 
"wages  paid  by  government  departments  and  con- 
tractors engaged  in  war  work  should,  after  confer- 
ence with  representatives  of  labor  and  industrial 
management,  be  stabilized  by  this  board."  ^  The 
Committee  on  Standardization  was  instructed  to 
proceed  with  its  work  "with  all  possible  expedi- 
tion." In  the  latter  part  of  July,  the  scope  of  this 
work  was  extended  to  cover  the  whole  country. 
"Wage  standardization,"  according  to  the  Board, 
"merely  extends  the  familiar  method  of  wage  fixing 
to  cover  the  entire  nation.  What  has  been  done  in 
many  industries  the  War  Labor  Policies  Board  is 
planning  to  do  for  the  whole  people.  But,  although 
wage  standardization  admittedly  follows  familiar 
precedent,  it  is  solely  a  war  measure." '  Thus 
far,  the  Board  has  consulted  representatives  of  the 
metal  trades  unions  and  employers,  and  employers 
and  men  in  the  building  trades.  The  task  of  stand- 
ardization has  just  begun,  and  the  easiest  part,  — 
the  plans,  —  represent  the  chief  accomplishment. 
Undoubtedly,  many  snags  and  shoals  lie  in  this 
course,  and  the  end  of  the  standardization  journey 
is  yet  a  long  way  off. 

1  0.  B.,  May  17,  1918,  p.  13.  *  Ibid.,  June  25,  1918,  p.  4. 

» Ibid..  July  25,  1918,  p.  12. 


132        PROBLEMS  OF  RECONSTRUCTION 

In  other  respects  the  policy  has  a  more  certain 
conclusion.  No  serious  difficulty  is  encountered  in 
preventing  competitive  bidding  between  war  and 
non-war  industries  for  labor;  thus,  the  resolution 
of  the  War  Industries  Board  of  July  11,  to  the 
effect  that  this  Board,  through  its  priority  division, 
will  withhold  preference  from  manufacturers  whose 
bidding  attracts  men  from  war  industries,  promises 
a  successful  outcome.^ 

Recently  the  Policies  Board  has  been  disturbed 
by  disquieting  rumors  that  its  action  would  make 
impossible  a  change  in  rates  of  wages  and  working 
conditions  pending  its  study  of  the  problems  of 
standardization.  To  make  clear  that  this  was  not 
the  case,  the  Board  stated  that  it  had  definitely 
adopted  the  principles  of  the  War  Labor  Board,  and 
restated  these  principles  at  considerable  length.^ 

The  Policies  Board  has,  also,  defined  its  attitude 
towards  women's  work.  While  recognizing  that 
substitution  is  necessary,  the  Board  urged  that  "a 
clearly  defined  policy  is  needed  which  shall  de- 
termine what  kinds  of  work  women  should  per- 
form, how  they  should  best  be  introduced,  under 
what  conditions  they  should  be  employed,  and 
what  work  they  should  perform."  ^  It  then  laid 
down  the  rules  that  the  shortage  of  labor  in  essential 
war  industries  should  be  met  in  part  by  further  intro- 
duction of  women,  but  that,  as  far  as  possible,  women 
shall  be  employed  in  occupations  most  easily  filled 

1  O.  B.,  July  16,  1918,  p.  5.  2  /j^^  July  22,  1918,  p.  15. 

3  Ibid.,  July  17,  p.  10. 


WAR  CONTROL  133 

by  them,  such  as  clerical  and  accounting  work  in 
manufacturing  and  mercantile  establishments ;  that 
women  should  not  be  employed  to  replace  men  in 
occupations  clearly  unfit  for  them,  as  in  pool  rooms, 
saloons,  mines,  smelters,  quarries,  and  glass  works ; 
and  that  where  women  are  engaged  in  industries 
involving  special  hazards,  special  care  shall  be  taken 
to  guard  their  health,  comfort,  and  safety.  The 
Board  also  urged  that  the  recruiting  of  women  into 
occupations  hitherto  held  by  men  should  not  be 
made  a  pretext  for  unnecessarily  replacing  men; 
that  the  recruiting  of  young  mothers  for  war  work 
should  be  discouraged,  and  that  where  women  are 
employed  in  such  new  occupations  as  street  car  and 
messenger  service,  it  should  be  done  under  special 
regulations  as  to  hours  of  work  and  night  service.^ 

One  more  activity  of  the  new  labor  administra- 
tion needs  discussion.  It  will  be  recalled  that  early 
in  January,  in  submitting  the  outlines  for  the  new 
labor  plan.  Secretaries  Baker  and  Wilson  urged  as 
one  of  the  elements  of  the  program  an  adequate  em- 
ployment service,  which  would  supply  labor  for  the 
war  industries. 2 

Prior  to  January  8,  1915,  the  Division  of  Infor- 
mation of  the  Bureau  of  Immigration  had  been  con- 
ducting an  employment  service  in  a  limited  way  in 
one  branch  office  in  New  York  City.  On  the  date 
just  named,  Secretary  Wilson  extended  the  scope 
of  the  employment  work,  with  the  intention  of  con- 
necting   it    with    various    local    agencies    over    the 

1  O.  B.,  July  17,  p.  10.  2  Cf.  supra,  p.  122. 


134        PROBLEMS  OF  RECONSTRUCTION 

country.^  In  the  latter  part  of  1917,  under  the 
stimulus  of  the  war  demands,  the  service  was  further 
amplified,  and  a  new  agency,  known  as  the  United 
States  Public  Service  Reserve,  was  organized.  All 
of  this  work,  however,  fell  far  short  of  meeting  the 
country's  problem  of  labor  supply.  As  a  prelim- 
inary to  a  more  extensive  service.  Secretary  Wilson, 
about  December  19,  announced  the  transfer  of  the 
United  States  Employment  Service  from  the  Bureau 
of  Immigration  to  the  oflSce  of  the  Secretary  of 
Labor.2  Forthwith,  the  work  took  on  a  new  as- 
pect, and  before  the  end  of  April,  the  Secretary  was 
able  to  announce  that  upwards  of  170  branch  offices 
were  in  existence  in  the  United  States.'  The  serv- 
ice assumed  still  more  definite  form  in  June,  when 
the  Employment  Service  undertook  the  responsi- 
bility of  organizing  the  supply  of  cargo  handlers  in 
the  important  ports  of  the  country.  The  method 
inaugurated  for  New  York  was  for  the  Shipping 
Board,  the  Quartermaster's  Corps  of  the  Army,  the 
Navy  Department,  and  the  Railroad  Administra- 
tion to  send  daily  notices  to  the  central  office  giving 
the  schedule  of  ship  arrivals  for  the  coming  day,  the 
maximum  number  of  men  required  for  prompt  dis- 
charge of  the  cargoes,  and  the  hour  and  the  place 
that  they  should  report.  With  this  information  the 
central  office  undertook  to  supply  the  men.  The  same 
arrangement  was  to  prevail  for  loading  of  vessels.^ 

»  Mon.  Rev.  U.  S.  Bu.  of  Lab.  Sta.,  Sept.  1917,  pp.  80  ff. 
«  O.  B.,  Dec.  19,  1918,  p.  3.  «  Ibid.,  April  17,  1918,  p.  8. 

1  im.,  June  17, 1918,  p.  8.  ' 


WAR  CONTROL  135 

After  conference  with  employment  managers,  rep- 
resentatives of  state  employment  agencies,  and 
officials  of  the  United  States  service,  the  Depart- 
ment of  Labor  announced  in  July  its  plan  for  re- 
cruiting unskilled  labor.  This  work,  covering  the 
needs  of  the  war  industries  of  the  entire  country, 
was  to  be  centralized  in  the  Department.  In  re- 
sponse to  the  request  of  the  Secretary  of  Labor, 
President  Wilson  asked  employers  to  refrain  from 
recruiting  unskilled  labor  after  August  1,  except 
through  the  employment  service  of  the  Depart- 
ment of  Labor. ^  A  definite  organization  was  pro- 
vided for  the  work,  and  provision  was  made  to  allot 
the  supply  to  meet  the  most  pressing  needs.  The 
plan  called  for  the  appointment  of  community 
boards  in  each  of  the  important  industrial  centers, 
composed  of  representatives  of  the  federal  service 
and  of  employers  and  workmen.  The  principal 
duty  of  these  boards  was  to  decide  on  the  relative 
needs  of  local  establishments  and  to  prorate  the 
supply.  To  facilitate  distribution  of  laborers  and 
to  learn  the  prospective  demands  of  war  industries, 
order  blanks  were  mailed  to  employers,  requesting 
prompt  statement  of  their  needs  to  designated 
state  officers.  No  promise  was  made  that  the 
supply  would  be  forthcoming,  for,  in  the  event  of 
a  real  shortage,  it  would  be  necessary  to  distribute 
laborers  where  they  were  most  needed.  The  pro- 
gram   did   not   include   all    industries.     Exceptions 

1  Bus.  Dig.,  July  3, 1918,  p.  25 ;  Com.  and  Fin.  Chron.,  June  22, 1918, 
pp.  2618  ff. 


136        PROBLEMS  OF  RECONSTRUCTION 

were  made  in  case  of  labor  for  railroads,  farms,  and 
establishments  employing  less  than  100  men,  and  of 
labor  which  was  not  solicited.  Nor  did  it  apply  to 
non-war  industries,  except  that  such  manufacturers 
were  urged  not  to  offer  superior  inducements  to 
attract  men  from  war  industries.  Employers  who 
possessed  a  field  force  were  permitted  to  use  it  only 
under  authorization  from  the  federal  employment 
service,^  and  in  the  case  of  war  industries,  adver- 
tising of  any  description  for  unskilled  labor  was 
prohibited. 

Possibly,  the  Department  is  looking  forward  to  a 
time  in  the  near  future  when  the  supply  of  skilled 
labor  also  will  be  brought  under  regulation.  In  an 
announcement  which  appeared  about  August  1,  it 
was  stated  that  "for  the  time  being  "no  restrictions 
are  placed  on  employers  recruiting  their  own  skilled 
labor,  except  that  they  are  not  to  conduct  their 
work  so  as  to  cause  labor  unrest.^ 

It  is  hardly  possible  to  grasp  the  significance  of 
these  new  departures  in  the  labor  policy  of  the 
country.  They  are  announced  as  war  measures, 
and  they  are  voluntary  with  respect  to  the  fact  that 
they  are  usually  reached  by  agreement  among  the 
parties  concerned.  But  there  freedom  ends.  Once 
principles  are  established,  and  once  a  method  of 
procedure  is  agreed  upon,  the  various  federal  agencies 
cooperating  with  the  Department  of  Labor  bring 

»  O.  B.,  July  9,  1918,  p.  5;  July  15,  1918,  p.  2;  July  22,  1918,  p.  3; 
Aug.  1.  1918,  p.  3.  2  Ibid.,  Aug.  1,  1918,  p.  3. 


WAR  CONTROL  137 

varying  degrees  of  pressure  to  bear  upon  employers 
to  obey  the  restrictions.  No  one  believes  that  we 
can,  or  that  we  should,  go  back  to  the  old  methods. 
Undoubtedly,  there  is  much  in  the  new  order  that 
is  worthy  of  preservation,  provided  it  is  adminis- 
tered so  as  not  to  interfere  too  seriously  with  free- 
dom of  action.  But  the  whole  program  is  too  new, 
and  its  operations  are  not  sufficiently  tested,  to 
permit  a  present  judgment.  For  these  reasons,  the 
new  program  requires  careful  thought  before  its 
elements  are  adopted  as  a  permanent  part  of  our 
system.  It  should  be  the  duty  of  some  reconstruc- 
tion committee  to  go  over  the  whole  plan  and  study 
its  workings  for  the  purpose  of  weeding  out  its 
bad  features  and  of  preserving  the  good. 


CHAPTER  V 

DEVELOPMENT  OF  WAR   CONTROL    {Continued) 

Other  Elements  of  Control 

The  measures  discussed  in  the  last  three  chapters 
by  no  means  exhaust  the  subjects  of  control.  With 
a  war  waged  on  the  modern  scale,  it  is  necessary  to 
put  the  country's  whole  industrial  strength  behind 
the  war  machine ;  thus  every  important  factor  of 
manufacture  and  commerce  that  may  contribute  to 
that  end  is  brought  under  regulation.  This  is  the 
outstanding  feature  of  modern  warfare.  The  meas- 
ures previously  discussed  refer  principally  to  domes- 
tic affairs  and  have  for  their  purpose  the  prevention 
of  undue  rises  in  prices,  stimulation  of  production,  a 
better  organization  of  some  of  the  factors  of  pro- 
duction, and  the  prevention  of  obstructions  to  in- 
dustry because  of  misunderstandings  between  em- 
ployers and  laborers.  Control  did  not  stop  here. 
It  has  developed  to  include  foreign  commerce,  in- 
cluding exports  and  imports,  capital  issues,  inland 
and  foreign  shipping  facilities,  government  pur- 
chases, and  the  flow  of  essential  raw  materials  to 
the  industries.  In  a  few  cases  regulation  covers  the 
standardization  of  commodities  for  domestic  con- 
sumption. And  withal,  there  has  been  developed 
an  interesting  system  of  inter-allied  cooperation  by 

138 


WAR  CONTROL  139 

which,  as  far  as  possible,  the  warring  nations  put 
their  resources  at  the  command  of  their  associates, 
and  honor  the  request  of  each  other  to  control  the 
movement  of  goods  where  their  own  interests  are 
concerned.  Control  is  thus  far  reaching  and  com- 
plete. It  includes  not  only  industry  within  our  own 
border,  but  relations  with  associates  and  neutrals.^ 
Now  that  the  system  is  under  way  it  seems  simple 
enough,  but  it  has  produced  enormous  changes  in 
the  old  relations  and  creates  problems  of  the  first 
moment  for  the  reconstruction  period  and  even  for 
later  times. 

For  some  time  before  the  United  States  entered 
the  war,  England  had  developed  a  method  of  con- 
trolling her  foreign  commerce  for  the  purpose  of 
conserving  shipping  and  essential  materials,  limit- 
ing domestic  consumption,  keeping  down  her  un- 
favorable trade  balances,  notably  with  the  United 
States,  diverting  her  industrial  activities  to  war 
ends,  and,  of  course,  preventing  important  raw 
materials  from  reaching  her  enemies.  The  move- 
ment of  goods  to  Holland,  Denmark,  Scandinavia, 
and  Spain  was  put  under  careful  regulation.  In 
most  cases,  commodities  were  consigned  to  respon- 
sible associations,  or  to  governments  themselves, 
under  promise  that  they  would  be  disposed  of  only 
as  England  prescribed.  For  example,  a  procla- 
mation of  December  23,  1916,  required  that,  with 
certain  exceptions,  all  articles  exported  to  Holland 
were  to  be  consigned  to  the  Dutch  government,  or 

1  WaU  St.  Jour.,  July  29,  1918. 


140        PROBLEMS  OF  RECONSTRUCTION 

to  diplomatic  and  consular  oflScers,  with  the  per- 
mission of  the  Ministry  of  Foreign  Affairs,  or  the 
Netherlands  Overseas  Trust. ^  The  Trust,  on  the 
other  hand,  undertook  to  faithfully  discharge  its 
obligations.  In  a  circular  of  April  1917,  it  called 
attention  to  the  fact  that  licenses  were  issued  for 
the  purpose  of  bringing  in  goods  for  home  consump- 
tion exclusively,  and  that  storage  of  goods  was 
strictly  against  the  provisions.  It  was  pointed  out 
that  the  return  of  peace  would  not  release  goods 
imported  under  trust,  but  that  these  would  be  held 
subject  to  the  non-exportation  agreements.^ 

Similar  methods  were  applied  by  England  to  her 
commerce  with  the  United  States.  Rubber,  nickel, 
wool,  and  leather,  among  other  commodities,  could 
be  obtained  by  our  merchants  and  manufacturers 
only  by  conforming  to  English  regulations.  To 
give  one  example ;  in  the  case  of  rubber,  our  pro- 
ducers obtained  the  raw  product  by  agreement  with 
the  British  War  Trade  Department.  To  make  sure 
that  the  finished  products  should  have  no  other  des- 
tination than  Britain  permitted,  it  was  required, 
as  a  condition  for  obtaining  the  raw  materials,  that 
the  finished  products  should  be  exported  to  neutral 
European  countries  by  way  of  England  or,  by  sub- 
sequent arrangements,  via  Halifax.^ 

The  prior  development  of  England's  machinery  of 

1  Com.  Rept.,  Dec.  28,  1916,  p.  1169;  for  other  illustrations  see  Com. 
Rept.  Dec.  5,  1916,  p.  866;  Jan.  3,  1917,  p.  17;  Jan.  9.  1917,  p.  97; 
July  7,  1917,  p.  65;  Aug.  18.  1917,  p.  641. 

2  Ibid.,  April  30,  1917,  p.  390. 

»  Com.  and  Fin.  Chron.,  June  16,  1917,  p.  2419. 


WAR  CONTROL  141 

foreign  trade  control  made  our  task  relatively  simple. 
We  have  profited  by  her  experience  and  have  availed 
ourselves  of  various  foreign  organizations  which 
have  come  into  existence  as  a  result  of  her  regula- 
tions. Indeed,  in  many  instances,  we  are  cooper- 
ating with  England,  as  with  our  other  associates, 
in  the  development  of  war  trade  control. 

The  authority  for  the  regulation  of  our  own 
foreign  commerce  is  contained  in  the  Espionage 
Act  of  June  15,  1917,  which  referred  to  exports, 
and  in  the  Trading  with  the  Enemy  Act  of  October 
6,  1917,  which  conferred  the  power  of  control  over 
imports  also.^  From  time  to  time,  the  President's 
proclamations  have  designated  ofiicials  whose  duty 
it  is  to  put  into  effect  the  provisions  of  the  acts,  and 
have  named  the  commodities  to  which  the  license 
system  is  to  be  applied,  and  indicated  the  countries 
to  which  commodities  could  or  could  not  be  shipped.^ 
It  will  be  observed  that  these  measures  are  not 
matters  of  customs  regulation.  As  such  they  would 
not  be  possible  under  our  Constitution.  They  are 
war  measures  designed  partly  to  regulate  the  des- 
tination of  trade,  and  partly  to  promote  various 
other  war  purposes. 

Title  VII,  Section  1,  of  the  Espionage  Act  makes 
the  following  provisions:  "Whenever  during  the 
present  war  the  President  shall  find  that  the  public 
safety  shall  so  require,  and  shall  make  proclamation 
thereof,  it  shall  be  unlawful  to  export  from  or  ship 

1  Public  No.  24,  65th  Congress  (II.  R.  291) ;  Public  No.  91  (H.  R. 
4960),  2  Cf.  infra. 


142        PROBLEMS  OF  RECONSTRUCTION 

from  or  take  out  of  the  United  States  to  any  country 
named  in  such  proclamation  any  article  or  articles 
mentioned  in  such  proclamation,  except  at  such  time 
or  times,  and  under  such  regulations  and  orders, 
and  subject  to  such  limitations  and  exceptions  as  the 
President  shall  prescribe,  until  otherwise  ordered  by 
the  President  or  by  Congress;  Provided,  however, 
that  no  preference  shall  be  given  to  the  ports  of  one 
State  over  those  of  another."  ^  Penalties  for  viola- 
tion of  the  law  include  a  fine  not  to  exceed  $10,000, 
or  in  the  case  of  natural  persons,  imprisonment  for 
not  more  than  two  years,  or  both  fine  and  imprison- 
ment ;  the  goods  may  be  seized  and  forfeited  to  the 
United  States ;  and  any  officer,  director,  or  agent  of 
a  corporation  who  participates  in  the  violation  of 
the  law  is  subject  to  fine  and  imprisonment. 

The  wording  of  Section  11  of  the  Trading  with  the 
Enemy  Act  is  nearly  like  that  of  the  portion  of  the 
Espionage  Act  just  quoted,  except  that  the  word 
"import"  appears  in  the  place  of  "export."  The 
combined  effect  of  the  two  laws,  therefore,  is  to  pro- 
vide regulation  for  commerce  entering  and  leaving 
the  country.  In  addition,  the  Trading  with  the 
Enemy  Act  provides  for  control  in  other  important 
respects.  It  is  authority  for  the  regulation  of  enemy 
insurance  companies  doing  business  in  the  United 
States,  for  the  appointment  and  activities  of  an  alien 
enemy  property  custodian,  for  the  use  of  enemy 
patents,  trade-marks,  prints,  etc.,  and  for  the  regu- 
lation of  certain  financial  transactions.^ 

1  Public  No.  ii,  op.  ciL,  pp.  9  and  10.  2  Public  No.  91,  op.  cit. 


WAR  CONTROL  148 

It  needs  no  explanation  to  make  clear  the  vast 
extent  of  control  involved  in  these  measures.  As 
far  as  commodities  are  concerned,  the  laws  reach 
not  only  merchants,  but  thousands  of  manufacturers 
as  well,  because  a  considerable  part  of  our  imports  is 
composed  of  raw  materials  which  supply  our  indus- 
tries and  give  employment  to  our  laborers  ;  the  bulk 
of  our  exports,  also,  is  composed  of  products  of  our 
factories.  The  influence  of  this  control,  therefore,  is 
felt  throughout  the  industrial  structure. 

A  feature  which  is  not  made  clear  by  a  statement 
of  the  laws  is  the  power  they  contain  of  regulating 
certain  kinds  of  commerce  within  neutral  countries. 
If  we  can  deny  such  neutrals  the  use  of  our  essen- 
tial commodities,  we  can  lay  down  conditions  for 
their  use  in  manufacture  and  commerce,  and  we  can 
make  their  receipt  a  condition  for  the  disposition 
of  many  commodities  of  neutral  production.^  This, 
indeed,  is  what  we  do  in  many  instances.  In  effect, 
we  not  only  regulate  our  own  commerce,  but  pre- 
scribe rules  for  the  guidance  of  neutrals  with  respect 
to  the  commodities  they  receive  from  us.  Again, 
this  is  one  of  the  unique  features  of  modern  war 
control.  The  reader,  undoubtedly,  asks  what  the 
results  will  be;  we  must  postpone  the  answer  to  a 
later  chapter. ^ 

In  most  respects,  the  reasons  which  have  led  to 
the  enactment  of  these  laws  are  the  same  as  involved 
in  English  control.^     In  the  words  of  the  War  Trade 

^  Cf.  English  measures  with  Sweden,  Com.  Rept.,  July  7,  1917,  p.  65. 
2  Cf.  infra.  Chap.  VII.  3  cf.  supra,  p.  139. 


144        PROBLEMS  OF  RECONSTRUCTION 

Board:  "The  military  situation  and  the  tonnage 
situation  have  made  increasingly  apparent  the  ne- 
cessity of  instituting  a  complete  and  thorough- 
going control  of  all  our  exports  and  imports."  ^ 
The  reasons  are  the  demand  for  tonnage  to  trans- 
port our  armies,  munitions,  and  commodities  to  Eu- 
rope, the  need  of  conservation  of  goods  for  the  use 
of  ourselves  and  our  allies,  the  need  of  supplying 
certain  Central  and  South  American  countries  de- 
pendent upon  us  for  products,  and  the  prevention 
of  our  commodities  from  reaching  Germany.  Where 
shipping  is  directed  largely  to  Europe,  the  amount 
of  space  allotted  for  trade  elsewhere  is  limited  and 
must  therefore  be  used  for  imports  which  answer  our 
most  pressing  needs.  Unlike  English  control,  it  is  not 
necessary  for  us  to  regulate  commerce  to  keep  down 
an  unfavorable  balance  of  trade,  because  the  balance 
is  already  heavily  in  our  favor ;  nor  is  it  necessary 
to  use  the  pruning  knife  on  the  masses  to  cut  their 
consumption  of  foreign  goods.  Our  principal  reasons 
are  the  conservation  of  goods  and  tonnage  and  the 
prevention  of  commerce  with  the  enemy. 

Before  the  passage  of  the  Trading  with  the  Enemy 
Act  the  organization  charged  with  the  control  of 
exports  was  the  Exports  Administrative  Board,  es- 
tablished by  executive  order  on  August  21,  1917.^ 
Two  months  before  this  date,  the  President,  by 
executive  order,  had  established  the  Exports  Coun- 
cil, composed  of  the  Secretary  of  State,  the  Secretary 

^  Rules  and  Regulations  of  the  War  Trade  Board,  No.  2  (May 
1918),  p.  9.  » Ibid.,  No.  1  (Nov.  1917),  p.  5. 


WAR  CONTROL  145 

of  Agriculture,  the  Secretary  of  Commerce,  and  the 
Food  Administrator,  and  vested  it  with  the  authority 
of  formulating  policies  for  the  consideration  of  the 
President,  and  for  making  recommendations  neces- 
sary to  carry  out  the  act.  In  accordance  with  this 
order,  the  Secretary  of  Commerce  organized  the 
Division  of  Export,  licensed  as  a  division  of  the 
Bureau  of  Foreign  and  Domestic  Commerce. 
Through  this  division  were  issued  licenses  in  ac-^ 
cordance  with  the  orders  and  regulations  issued 
from  time  to  time  by  the  President.^ 

The  passage  of  the  Trading  with  the  Enemy  Act 
made  necessary  a  change  of  organization.  A  new 
body,  the  War  Trade  Board,  was  established  by  an 
order  of  October  12,  1917;  it  took  over  the  func- 
tions of  the  Exports  Administrative  Board  and  ob- 
tained other  functions  to  suit  the  new  situation.^ 
Meanwhile,  there  was  created  the  War  Trade  Coun- 
cil, composed  of  the  Secretaries  of  State,  Treasury, 
Agriculture,  Commerce,  and  the  Food  Administrator, 
to  act  in  an  advisory  capacity  to  the  President.^ 
On  October  12,  the  President  also  designated  the 
oflBcers  who  were  to  make  concrete  applications  of 
the  various  powers  conferred  by  the  Trading  with 
the  Enemy  Act.*  As  one  might  conclude  from  the 
above,  a  number  of  the  members  of  the  War  Trade 
Board  are  representatives  of  the  various  secretaries 
named  above  and  of  the  Food  Administrator.^ 

1  Rules  and  Regulations  of  the  War  Trade  Board,  No.  2  (May  1918), 
p.  6.  2  75^^  pp   5  and  42.  ^  /^,y^  p,  43 

*  Ibid.,  pp.  42  and  43.  ^  Ilnd.,  No.  1  (Nov.  1917),  p.  2. 

L 


146        PROBLEMS  OF  RECONSTRUCTION 

The  machinery  was  now  ready  for  the  work  of 
control.  The  next  step  was  to  designate  the  com- 
modities to  be  put  under  license,  and  to  indicate  the 
countries  with  which  trade  was  permissible.  This 
was  done  by  the  President's  proclamations  of  July 
9  and  August  27,  1917.^  According  to  the  former 
proclamation,  the  following  commodities  could  be 
exported  only  under  license:  "Coal,  coke,  fuel  oils, 
kerosene  and  gasoline,  including  bunkers,  food 
grains,  flour  and  meal  therefrom,  fodder  and  feeds, 
meat  and  fats ;  pig  iron  and  scrap  steel ;  f erro- 
manganese ;  fertilizers  ;  arms,  ammunition,  and  ex- 
plosives." A  long  list  of  regions  was  indicated  to 
which  these  commodities  could  not  be  shipped  except 
by  permission.^  The  proclamation  of  August  27 
greatly  extended  the  list  of  commodities  placed 
under  the  license  system. 

In  explaining  the  latter  proclamation,  President 
Wilson  said:  "The  purpose  and  effect  of  this  proc- 
lamation is  not  export  prohibition  but  merely  ex- 
port control.  It  is  not  the  intention  to  interfere 
unnecessarily  with  our  foreign  trade;  but  our  own 
domestic  needs  must  be  adequately  safeguarded, 
and  there  is  the  added  duty  of  meeting  the  neces- 
sities of  all  the  nations  at  war  with  the  Imperial 
German  Government.  After  those  needs  are  met, 
it  is  our  wish  and  intention  to  minister  to  the  needs 
of  the  neutral  nations  as  far  as  our  resources  permit. 
This  task  will  be  discharged  without  other  than  the 

^  Rules  and  Regulations  of  the  War  Trade  Board,  No.  1  (Nov.  1917), 
pp.  6,  11,  12.  »Ibid. 


WAR  CONTROL  147 

very  proper  qualification  that  the  liberation  of  our 
surplus  products  shall  not  be  made  the  occasion  of 
benefit  to  the  enemy,  either  directly  or  indirectly."  ^ 

On  September  7,  1917,  the  President  issued  a 
proclamation  forbidding  the  export  of  coin,  bullion, 
and  currency  to  all  countries  mentioned  in  the 
proclamation  of  August  27,  except  with  the  consent 
of  the  Federal  Reserve  Board,  and  subject  to  the 
approval  of  the  Secretary  of  the  Treasury.^ 

Two  other  proclamations,  namely,  of  November 
28,  1917,  and  February  14,  1918,  have  placed  the 
entire  foreign  commerce  of  the  United  States  under 
the  license  system.  From  an  administrative  point 
of  view,  there  is  undoubtedly  a  great  advantage  in 
requiring  licenses  for  all  articles  entering  our  foreign 
trade.  Since  November  28,  1917,  import  licenses 
were  required  for  many  of  the  basic  raw  materials, 
and  importers  were  familiar  with  the  method  of  pro- 
curing them.  The  added  inconvenience  of  applying 
for  licenses  for  all  importations  was  negligible  in  com- 
parison to  the  advantages  obtained.  Thus  the  ques- 
tion as  to  what  did  or  did  not  require  license,  which 
was  a  cause  of  uncertainty  and  delay,  was  obvi- 
ated.' The  War  Trade  Board  added  that  "the  ben- 
efits to  be  derived  from  this  license  system  are 
numerous,  one  of  the  most  obvious  being  that  the 
present  control  over  the  disposition  and  use  of  raw 
materials,  which  are  now  being  imported  under 
license,  will  be  extended  to  all  materials,  so  that  if  at 

*  Rules  and  Regulations  of  the  War  Trade  Board,  No.  1  (Nov.  1917), 
p.  13.  *  Ibid.,  p.  22.  3  Ibid.,  No.  2  (May  1918),  p.  62, 


148        PROBLEMS  OF  RECONSTRUCTION 

any  time  a  shortage  exists  or  appears  imminent  in 
any  imported  material  the  supply  thereof  may  be 
directed  to  the  uses  most  vital  to  our  martial 
requirements."  ^  In  addition,  these  arrangements 
were  most  effective  in  preventing  commodities 
from  reaching  the  enemy.  Said  the  Board:  "To 
stamp  out  all  activities  among  such  agencies  and  to 
safeguard  our  well-intentioned  citizens  from  dealing 
with  them,  we  must  proceed  with  the  utmost  prompt- 
ness and  vigor.  The  forms  of  activity  of  these  con- 
cerns and  the  subtle  and  intricate  methods  pursued 
by  them  are  innumerable,  but  are  invariably  directed, 
either  by  furnishing  information,  smuggling  supplies 
through  the  blockade,  providing  credits,  or  hoard- 
ing for  post-war  purposes,  to  give  aid  and  comfort 
to  the  enemy."  ^ 

The  administration  of  this  control  has  also  re- 
sulted in  two  other  interesting  developments,  namely, 
the  voluntary  organization  of  many  trades,  such  as 
rubber,  wool,  jute,  and  tin,  to  act  as  consignees  when 
this  becomes  necessary,  and  in  other  respects  to  co- 
operate with  the  War  Trade  Board,  both  in  making 
its  orders  effective  and  in  preserving  the  organiza- 
tion and  welfare  of  the  trade ;  ^  the  other  develop- 
ment is  the  rationing  or  allotting  a  limited  supply  of 
raw  products  among  producers  so  that  each  may 
have  a  fair  share. 

Unlike  many  of  the  committees  of  the  Council  of 
National  Defense  which  were  formed  to  deal  only 

1  Rules  and  Regulations  of  the  War  Trade  Board,  No.  2  (May  1918), 
p.  62.  a  Ibid.  '  Ibid.,  p.  63. 


WAR  CONTROL  149 

with  the  war  industries,  the  war  service  committees 
just  referred  to  are  committees  of  the  industries 
themselves.^  In  many  instances  these  were  brought 
into  existence  through  the  influence  of  the  Chamber 
of  Commerce  of  the  United  States.  Organizations 
of  industries  and  trades  are  nothing  new  in  this 
country.^  Indeed,  they  have  existed  for  many 
years  and  are  designed  for  various  purposes,  ranging 
from  the  very  general  work  of  promoting  the  in- 
dustrial interest  of  a  locality,  or  of  a  given  group  of 
industries,  to  the  more  concrete  work  of  regulating 
trade  practices,  fixing  prices  and  conditions  of  sale, 
limiting  output,  and  many  other  purposes,  some  of 
which  have  been  adjudged  contrary  to  our  laws. 
The  war  service  committees,  however,  are  primarily 
emergency  war  organizations.  Their  activity  looks 
two  ways ;  on  the  one  hand,  they  keep  a  watchful 
eye  on  the  conditions  of  their  industry,  and  on  the 
other,  they  serve  as  the  point  of  contact  between 
the  industry  as  a  whole  and  the  Government.  The 
program  of  the  Rubber  Association  of  America 
illustrates  some  of  these  functions.  Its  purposes 
are  to  represent  the  trade  in  relations  with  the  Gov- 
ernment, to  assist  the  Government  in  obtaining  in- 
formation as  to  the  capacity  of  the  rubber  trade  in 
serving  the  needs  of  the  Government,  to  cooperate 
in  the  standardization  of  products  for  government 
use,  and  to  put  before  the  Government  the  needs 

*  Nation's  Business,  Feb.  1918,  p.  12. 

*  Commercial  Organizations  in  the  United  States,  Special  Agent 
Series  No.  79. 


150        PROBLEMS  OF  RECONSTRUCTION 

of  the  industry.^  Many  other  committees  of  this 
description  have  been  formed,  both  in  this  country 
and  in  England.^  In  some  respects  they  forecast  a 
new  relation  between  government  and  industry,  in 
which  the  essential  characteristic  is  that  of  co- 
operation. 

The  second  development  named  above  is  con- 
nected with  the  growth  of  the  war  service  committees, 
because  it  is  through  these  that  the  arrangements 
are  made  effective.  Apportioning  and  allotting  of 
the  product  becomes  necessary  when  only  a  limited 
supply  of  raw  materials  is  permitted  to  come  into 
the  country.  Some  industries  would  be  forced  to 
close  if  the  diminished  import  were  delivered  only 
to  a  few  plants.  Since  it  is  the  purpose  of  regu- 
lation to  disturb  industry  as  little  as  possible,  the 
principle  implies  giving  to  each  a  fair  proportion  of 
the  restricted  supply,  hence  the  need  of  apportion- 
ment.^ When  the  Government,  in  November  1917, 
decided  to  control  the  import  of  tin,  the  task  of 
distributing  the  product  was  placed  in  the  hands 
of  the  Sub-committee  on  Tin  of  the  American  Iron 
and  Steel  Institute.  The  committee  worked  under 
the  authority  and  control  of  the  Government.* 
No  person  was  permitted  to  import  tin  through  the 
Institute  except  on  guarantee  not  to  use  it  for 
speculative  purposes  or  exportation.     The  Institute 

1  Bus.  Dig.,  Jan.  30,  1918,  p.  163. 

«  Nation's  Business,  Feb.  1918,  pp.  12  ff . ;  Nov.  1917,  p.  39 ;  Bus.  Dig., 
Dec.  12,  1917,  p.  495;   O.  B.,  Dec.  15,  1917,  p.  3. 

«  Cf.  infra.  *  Bus.  Dig.,  Nov.  28,  1917,  p.  410. 


WAR  CONTROL  151 

kept  records  of  all  tin  imported  and  released  to  con- 
sumers, including  data  necessary  to  indicate  final 
disposition  and  consumption.  From  time  to  time 
reports  were  required  of  importers  and  dealers  to 
serve  as  a  basis  for  future  control  of  the  industry. 
It  was  expected  that  by  concentrating  control  in 
the  hands  of  the  Institute  importation  would  be 
expedited  and  the  market  stabilized.^ 

The  recent  methods  of  administering  the  control 
of  rubber  suggest  a  similar  procedure.  The  import 
was  limited  temporarily  at  the  rate  of  100,000  tons 
a  year,  or  to  25,000  tons  a  quarter.  Representatives 
of  the  trade  were  consulted  in  making  this  arrange- 
ment, and  the  Government  availed  itself  of  the 
offices  of  the  Rubber  Association  in  making  known 
to  the  trade  the  method  of  allocation.  The  nation's 
requirements  were  to  be  taken  care  of  first ;  the  re- 
mainder of  the  supply  was  to  be  allotted  to  manu- 
facturers on  the  basis  of  a  certain  fraction  of  their 

»  Com.  and  Fin.  Chron.,  Nov.  24,  1917,  p.  2050.  Illustrating  this 
method  Mr.  Clarence  M.  Wooley  of  the  War  Trade  Board  said :  "If  a 
consignment  of  pig  tin  is  to  come  into  the  country,  the  license  provided 
that  the  consignee  shall  be  the  Sub-committee  on  Pig  Tin  of  the  Amer- 
ican Iron  and  Steel  Institute,  a  committee  appointed  for  that  express 
purpose  by  the  members  of  the  tin  industry.  When  the  goods  arrive 
at  the  port  of  entry,  the  licensee  presents  to  that  committee  a  form  of 
guarantee  as  specified  by  the  War  Trade  Board,  and  if  this  is  in  proper 
form,  the  consignee,  which  in  this  instance  is  the  Sub-committee  on  Pig 
Tin,  indorses  over  or  releases  to  the  licensee,  or  ultimate  receiver  of  the 
goods,  the  bill  of  lading;  whereupon  the  latter  may  take  delivery  of  the 
consignment  at  the  customs  house.  .  .  .  These  committees,  which  act  as 
consignees,  have  no  right  or  power  to  claim  for  themselves  or  for  the 
Government  any  arbitrary  prerogative."  Cf.  Nation's  Business,  March, 
1918,  p.  11. 


152        PROBLEMS  OF  RECONSTRUCTION 

last  year's  requirements.^  The  reader  cannot  fail 
to  recognize,  both  in  the  terms  employed  in  these 
orders  and  in  the  procedure,  much  that  suggests 
methods  of  pooling  which  were  long  ago  declared  un- 
lawful. It  should  be  pointed  out,  however,  that 
the  purposes  of  the  old  pooling  arrangements  were 
largely  to  limit  the  supply  in  order  to  keep  up  the 
price,  while  the  present  object  is  to  make  a  limited 
supply  go  round. 

The  control  of  foreign  commerce  was  not  com- 
plete with  only  the  regulation  of  commodities,  coin, 
bullion,  and  currency.  Without  the  control  of  ex- 
change also  it  was  impossible  to  prevent  our  financial 
resources  from  being  used  for  enemy  benefit,  nor 
was  it  possible  to  control  fluctuations  of  exchange. 
Another  step,  therefore,  was  to  place  foreign  ex- 
change under  control.  This  was  done  by  executive 
order  dated  January  29,  1917.  Secretary  McAdoo 
explained  that  "the  purpose  of  the  order  is  to  place 
dealers  in  foreign  exchange  and  in  the  sale  of  secu- 
rities or  foreign  account  under  such  control  as  will 
prevent  the  use  of  the  banking  facilities  and  the 
markets  of  the  United  States  for  the  benefit  of  its 
enemies."  ^  Dealers  were  divided  into  classes  de- 
pending on  the  nature  of  their  business.  They  were 
required  to  register,  to  make  declaration  that  the 
business  passing  through  their  hands  did  not  give 

1  O.  B.,  May  8,  1918,  p.  1 ;  ibid..  May  9,  1918.  p.  2;  Bus.  Dig.,  May 
15,  1918,  p.  653;  ibid..  May  22,  1918,  p.  681;  Com.  and  Fin.  Chron., 
May  11,  1918,  p.  1960;  Wall  Street  Jour.,  Aug.  1,  1918. 

»  Com.  and  Fin.  Chron.,  Feb.  2,  1918,  p.  438 ;  Feb.  9,  1918,  pp.  541  ff. 


WAR  CONTROL  153 

assistance  to  the  enemy,  and  to  render  weekly 
statements  indicating  the  general  trend  of  trans- 
actions in  the  exchange  market.  The  regulation 
was  put  in  the  hands  of  the  Federal  Reserve  Board. 
We  have  pointed  out  that  the  control  of  com- 
merce included  not  only  commodities  entering  and 
leaving  our  borders,  but  to  a  considerable  extent  the 
destination  and  use  of  our  materials  in  foreign  coun- 
tries. Control  is  effected  through  the  license  sys- 
tem. Whether  goods  are  destined  for  distribution 
through  branches  or  agencies  of  American  houses 
abroad,  or  through  foreign  agencies,  the  War  Trade 
Board  requires  rigid  adherence  to  the  terms  of  the 
contract,  so  that  commodities  may  be  disposed  of 
only  under  the  regulations.  Said  the  War  Trade 
Board:  "Shippers  should  bear  in  mind  that  there 
is  more  than  a  legal  obligation  resting  upon  them 
when  they  sign  this  contract,  and  they  will  be  asked 
to  show  any  proof  they  may  have  that  it  can  be 
carried  out.  .  .  .  When  goods  are  received  at  their 
destination  abroad  by  the  branch  or  agent  of  the  ship- 
per, they  must  not  be  resold  or  exported  from  such 
foreign  country  without  complying  with  the  regu- 
lations." ^  The  agreements  contain  the  provisions 
that  "the  merchandise  so  exported  will  be  sold 
only  under  such  rules  and  regulations  as  the  Amer- 
ican Consul  having  jurisdiction  over  the  territory 
to  which  the  goods  are  shipped  or  the  War  Trade 
Board  may  from  time  to  time  promulgate,"  and  that 

1  Rules  and  Regulations  of  the  War  Trade  Board,  No.  2  (May  1918), 
p.  42. 


154        PROBLEMS  OF  RECONSTRUCTION 

"the  guarantor,  when  called  upon  to  do  so,  will 
furnish  to  either  the  War  Trade  Board  or  any 
American  Consul  full  statements  of  any  transaction, 
together  with  any  books,  papers,  or  memoranda 
showing  the  facts  in  connection  therewith."  ^ 

Other  methods  are  provided  where  goods  are  not 
sold  through  American  agencies.  In  the  case  of 
Switzerland,  the  procedure,  as  described  in  May 
1918,  was  for  the  purchaser  to  apply  to  the  Societe 
Suisse  de  Surveillance  Economique  at  Berne  for  the 
privilege  of  importing  certain  commodities.  When 
this  permission  was  granted,  the  S.  S.  S.  cabled  its 
action  to  the  Legation  of  Switzerland  at  Washing- 
ton. The  American  exporter  filed  his  application 
with  the  Swiss  Legation,  which  checked  the  S.  S.  S. 
permit  and,  if  satisfactory,  indorsed  the  application 
to  the  War  Trade  Board.^  Licenses  granted  by  the 
Board  were  forwarded  to  the  Legation,  which,  in 
turn,  notified  the  applicant  and  ultimately  delivered 
the  license  to  him. 

In  the  case  of  Holland,  the  control  has  been  ad- 
ministered chiefly  through  the  Netherlands  Over- 
seas Trust  (N.  O.  T.).  This  is  a  private  Dutch  cor- 
poration which  makes  agreements  with  the  Allies 
whereby  goods  imported  from  overseas  are  con- 
sumed in  Holland.^  The  trade  organizations  within 
Holland,  however,  have  undergone  several  changes. 

^  Rules  and  Regulations  of  the  War  Trade  Board,  No.  2  (May  1918), 
p.  42. 

»  Ibid..  Bus.  Dig.,  March  6,  1918,  p.  326;  Com.  Rept.,  Jan.  4,  1916, 
p.  177;   April  5,  1916,  p.  63. 

»  Com.  Rept.,  June  28,  1918,  p.  1202. 


WAR  CONTROL  155 

In  the  latter  half  of  1917  the  Dutch  Export  Com- 
pany was  formed,  partly  to  supplement  the  work  of 
the  N.  O.  T.  and  for  other  purposes,  such  as  sim- 
plifying export  control,  providing  possible  means  for 
equitable  taxation,  coordinating  Holland's  export 
policy  with  her  policy  of  domestic  distribution,  and 
enabling  the  country  better  to  bargain  with  foreign 
countries  for  the  needed  imports.^  Recently,  a  new 
organization  has  been  proposed,  namely,  the  Neth- 
erlands Import  and  Export  Company,  which  is  to 
work  in  close  harmony  with  the  N.  0.  T.  Accord- 
ing to  the  proposed  measures,  the  latter  will  con- 
tinue to  guarantee  the  consumption  in  Holland  of 
commodities  imported  from  abroad,  while  the  former 
organization,  among  other  things,  is  to  be  responsible 
for  the  granting  of  permits  for  importation.  These 
illustrations  are  sufficient  to  show  the  method  of 
controlling  our  commerce  with  neutrals.  Arrange- 
ments have  been  made  also  with  Denmark,  Norway, 
Sweden,  and  Spain,  by  which  American  products  are 
consigned  to  responsible  parties  under  guarantee  that 
the  goods  will  be  disposed  of  only  as  prescribed  by 
our  regulations.^ 

The  control  of  commerce  with  the  countries  to  the 

1  Com.  Kept.,  Oct.  24,  1917,  p.  324;  Nov.  20,  1917,  p.  690;  June  28, 
1918.  pp.  1202  ff.;   Com.  Rept.  (Supplement),  June  22,  1918,  p.  5. 

2  For  arrangements  with  Norway  see  War  Trade  Board  Journal  No. 
11,  July  1918,  pp.  5,  6;  Wall  Street  .lour.,  Feb.  25,  1918;  O.  B.,  May  4, 
1918,  p.  1;  May  10,  1918,  p.  553;  .Tune  3,  1918,  p.  854;  W.  T.  B.  R. 
126.  For  Denmark  see  Com.  Rept.,  May  22,  1918,  p.  706 ;  O.  B.,  March 
23,  1918,  p.  3;  War  Trade  Board  .Journal,  No.  11,  July  1918,  p.  6.  For 
arrangement  with  Spain  see  O.  B.,  March  9,  1918,  p.  1. 


156        PROBLEMS   OF  RECONSTRUCTION 

south  of  us  is  on  a  different  basis.  Here  the  prin- 
cipal problem  is  to  supply  the  regions  which  have 
long  been  dependent  on  us  for  certain  products. 
Thus,  to  lessen  the  hardships  caused  by  our  war 
control,  the  War  Trade  Board  permits  the  export  of 
some  articles,  which  we  sorely  need,  when  the  evi- 
dence submitted  with  the  application  for  license 
justifies  the  shipment.^  In  the  case  of  imports  from 
the  southern  countries,  one  of  the  chief  problems  is 
to  conserve  tonnage.  With  this  end  in  view,  the  War 
Trade  Board,  on  July  18,  announced  that  by  an  ar- 
rangement with  the  United  States  Shipping  Board  a 
vessel  had  been  allotted  to  carry  coffee  from  Brazil 
to  New  Orleans.  Import  licenses  covering  ship- 
ments on  this  vessel  were  allotted  by  the  Board  to 
importers  of  record  for  the  calendar  years  1916  and 

1917.  Importers  were  instructed  to  notify  the 
Board  of  their  requirements.^ 

The  upshot  of  these  many  measures  is  that  the 
principal  factors  affecting  our  foreign  commerce  are 
brought  under  control.  Imports  and  exports  are 
subject  to  license,  the  consumption  of  our  products 
in  neutral  countries  is  carefully  guarded,  measures 
are  taken  to  supply  dependent  countries  of  South 
and  Central  America,  and  machinery  is  perfected  to 
accomplish  these  ends. 

The  control  of  capital  issues  involves  quite  a  dif- 
ferent problem.     While  the  principal  purpose  is  to 

1  Journal  of  the  War  Trade  Board,  No.  1,  Nov.  15, 1917,  p.  3. 

«  W.  T.  B.  R.  170.     For  Cuba  cf.  O.  B.,  Jan.  10,  1918,  p.  1 ;  Feb.  21, 

1918,  p.  4;   May  13,  1918,  p.  1. 


WAR  CONTROL  157 

conserve  credit  for  war  uses,  this  policy  accom- 
plishes other  desirable  results,  since  it  discourages  the 
production  of  luxuries,  restricts  investments  in  less 
important  enterprises,  and  thereby  saves  materials 
and  labor  for  the  more  important  war  uses.  "There 
is  not  an  unlimited  supply  of  credit,  or  of  goods,  or 
of  man  power,"  said  Mr.  W.  P.  G.  Harding,  gover- 
nor of  the  Federal  Reserve  Board.  "Wherever  pos- 
sible, such  resources  should  be  conserved  and  set 
aside  for  the  use  of  labor,  of  transportation,  of 
material,  and  reserves  which  ought  to  be  kept  free 
for  the  use  of  the  Government."  ^  Considering  the 
future  problems  of  reconstruction.  Governor  Hard- 
ing said  :  "Conservation  of  our  commodities  and  of 
our  gold  —  preservation  of  our  economic  strength  — 
is  of  the  greatest  importance  in  making  provision 
for  the  period  of  readjustment  which  will  follow 
the  reestablishment  of  peace.  The  country  having 
the  largest  supply  of  goods  and  gold  available  at  the 
end  of  the  war  will  find  itself  in  the  best  strategic 
position  for  controlling  the  markets  of  the  world."  ^ 
Restrictions  on  the  use  of  capital,  therefore,  ac- 
cording to  Governor  Harding,  serve  two  purposes  : 
while  they  strengthen  our  war  program,  at  the 
same  time  they  conserve  our  industrial  power  for  the 
coming  period  of  reconstruction. 

The  control  of  capital  issues  was  forecasted  in 
Secretary  McAdoo's  letter  early  in  December  to  Mr. 
E.  A.  Deeds  of  Dayton,  Ohio,  president  of  the 
Miami  Conservancy  District.     Mr.  Deeds  had  in- 

1  Federal  Reserve  Bulletin,  Aug.  1918,  pp.  686,  687.  *  Ibid. 


158        PROBLEMS  OF  RECONSTRUCTION 

quired  of  the  Secretary  regarding  the  expediency  of 
expending  upwards  of  $25,000,000  on  a  flood  con- 
trol project.  To  this  letter  Mr.  McAdoo  replied : 
*'It  is  my  hope  that  others  charged  with  similar 
responsibilities  in  respect  to  the  financing  of  enter- 
prises, both  public  and  private,  will  make  it  their 
practice  to  consult  with  the  Secretary  of  the  Treas- 
ury before  undertaking  any  new  financing  or,  indeed, 
before  making  commitments  or  expenditures  which 
would  require  to  be  financed  by  borrowing."  ^ 
In  his  annual  report  dated  December  3,  1917,  Secre- 
tary McAdoo  urged  strongly  the  importance  of 
avoiding  unnecessary  expenditures  in  both  public 
and  private  enterprises,^  but  he  pointed  out  that  he 
had  no  authority  to  disapprove  of  new  financial 
transactions.^  However,  requests  for  advice  came 
in  large  numbers  from  corporation  executives, 
bankers,  and  municipal  oflScials,  and  the  burden  of 
the  new  work  grew  so  rapidly  that  the  Secretary  in 
January  requested  the  Federal  Reserve  Board  to 
assume  the  responsibility  of  passing  on  proposals 
submitted  to  them.  The  Board  took  up  its  new 
duties  on  January  14,  and  voted  to  appoint  a  capital 
issues  committee  and  to  provide  the  necessary  staff 
to  carry  on  the  work.^  Subsequently,  committees 
were  appointed  for  the  twelve  Federal  Reserve  Dis- 
tricts.    The  plan  of  operation  of  the  committee  was 

1  O.  B.,  Dec.  10,  1917,  p.  3. 

*  Annual  Report  of  the  Secretary  of  the  Treasury  (1917),  pp.  1,  2. 
3  0.  B.,  Jan.  12,  1918,  p.  1;    Federal  Reserve  Bulletin,  Feb.  1918^ 
p.  72;  ibid.,  Aug.  1918,  pp.  704  ff. 

<  Federal  Reserve  Bulletin,  Aug.  1918,  pp.  704,  705. 


WAR  CONTROL  169 

that  of  the  EngKsh  capital  issues  committee;  that 
is,  it  accomplished  its  work  through  the  voluntary 
cooperation  of  the  enterprise  concerned.  At  first 
the  committee  advised  that  it  would  consider  indus- 
trial and  public  utility  issues  of  $500,000  and  over, 
and  municipal  issues  of  $250,000  and  over,  but 
urged  a  conference  even  on  issues  for  smaller  amounts. 
Subsequently,  the  amount  for  both  classes  was  re- 
duced to  $100,000.  Some  of  the  fundamental  prin- 
ciples adopted  were  that  favorable  action  would  be 
taken  only  where  state,  county,  municipal,  cor- 
porate, or  individual  financing  involved  projects 
which  would  contribute  to  the  successful  prosecu- 
tion of  the  war,  or  which  were  essential  to  the  public 
health  or  welfare ;  as  to  irrigation  and  drainage  proj- 
ects, favorable  consideration  would  be  given  only 
to  those  of  great  economic  or  military  importance 
and  from  which  definite  results  could  be  secured 
in  time  to  be  of  assistance  during  the  war.  As  a 
rule,  the  committee  approved  only  of  projects 
which  were  likely  to  bring  results  within  a  year, 
except  where  government  departments  advised  that 
work  ought  to  be  undertaken  extending  beyond 
that  period,  and  where  uncompleted  enterprises 
were  in  need  of  financial  aid.  Favorable  consid- 
eration was  also  given  to  refunding  operations, 
and  also  to  the  funding  of  capital  expenditures  in- 
curred prior  to  February  1,  provided  that  "the 
committee  might  deviate  from  this  policy  if  avail- 
able cash  assets  reasonably  might  be  used  for  the 
payment  of  such  debts  in  whole  or  in  part,  or  exces- 


160        PROBLEMS  OF  RECONSTRUCTION 

sive  cash  distributions  to  shareholders  were  con- 
templated, or  in  cases  where  the  requirements  of  the 
corporation  could  be  met  in  some  other  manner 
without  risk  or  hardship."  ^  According  to  the 
committee's  report  of  July  17,  forty-six  meetings 
were  held  and  361  applications  were  passed  upon, 
aggregating  upwards  of  $478,458,300.^ 

As  indicated  above,  these  measures  were  volun- 
tary. No  doubt  the  accomplishments  were  even 
greater  than  the  figures  above  would  suggest,  for, 
as  the  committee  urged,  its  very  existence,  and  the 
campaign  of  education  which  it  inaugurated,  dis- 
couraged at  the  source  commitments  for  capital 
expenditures,  and  thereby  conserved  material,  labor, 
and  credit  for  essential  industries  and  for  the  uses 
of  the  Government.'  Nevertheless,  pressure,  which 
in  many  instances  amounted  to  prohibition,  could 
be  employed  by  other  departments  of  Government 
control.  This  could  easily  be  accomplished,  for 
example,  through  the  priority  privileges  of  the 
War  Industries  Board.  Indeed,  the  Board  an- 
nounced in  March  that  all  new  undertakings  not 
essential  for  the  public  interest,  and  not  contribut- 
ing either  directly  or  indirectly  toward  winning  the 
war,  would  be  discouraged,  notwithstanding  they 
were  of  local  importance  and  of  a  character  which 
should  in  normal  times  meet  with  every  encourage- 
ment.*    At  this  time  the  Board  passed  a  resolution 

1  Federal  Reserve  Bulletin,  Aug.  1918,  pp.  706,  707. 

2  Ibid.,  p.  708.  3  iiid^^  p.  708. 
*  O.  B.,  March  27,  1918,  p.  5.    ' 


WAR  CONTROL  161 

to  the  effect  that  "in  fairness  to  those  interested 
therein  notice  is  hereby  given  that  this  Board  will 
withhold  from  such  projects  priority  assistance, 
without  which  new  construction  of  the  character 
mentioned  will  frequently  be  found  impracticable, 
and  that  this  notice  shall  be  given  wide  publicity, 
that  all  parties  interested  in  such  undertakings 
may  be  fully  apprised  of  the  difficulties  and  delays 
to  which  they  will  be  subjected  and  embark  upon 
them  at  their  peril."  ^ 

The  creation  of  the  War  Finance  Corporation  un- 
der authority  of  the  act  of  April  5,  1918,  provided  a 
new  arrangement  for  capital  issues.^  According  to 
Title  11,  section  200  of  the  law,  "there  is  hereby 
created  a  committee  to  be  known  as  the  'Capital 
Issues  Committee,'  hereinafter  called  the  Com- 
mittee, and  to  be  composed  of  seven  members  to  be 
appointed  by  the  President  of  the  United  States, 
by  and  with  the  advice  and  consent  of  the  Senate. 
At  least  three  of  the  members  shall  be  members  of 
the    Federal    Reserve    Board."     This    committee, 

^  O.  B.,  March  27,  1918,  p.  5.  This  resolution  was  approved  by  the 
National  Association  of  Manufacturers  on  May  21,  1918 ;  cf.  O.  B.,  June 
10,  1918,  p.  4.  Early  in  February  1918,  Secretary  McAdoo  issued  an 
announcement  discouraging  the  building  of  dwellings ;  cf .  O.  B.,  Feb.  5, 
1918,  p.  1.  In  May  manufacturers,  except  those  engaged  in  industries 
necessary  for  the  prosecution  of  the  war,  were  urged  to  extinguish  their 
debts  rather  than  borrow  even  to  increase  capacity  or  output;  mer- 
chants, also,  were  discouraged  from  carrying  large  stocks  of  fashionable 
and  luxury  articles  and  of  those  for  mere  comfort ;  cf .  O.  B.,  May  G,  1918, 
p.  3.  The  Federal  Reserve  Board  in  April  urged  the  conservation  of 
bank  credit;    cf.  Federal  Reserve  Bulletin,  April  1918,  pp.  263  ff. 

!« Public  No.  121,  65th  Congress  (S.  3714). 
M 


162        PROBLEMS  OF  RECONSTRUCTION 

therefore,  takes  the  place  of  the  former  voluntary 
body  acting  under  the  auspices  of  the  Federal  Re- 
serve Board.  Members  not  otherwise  receiving 
compensation  from  the  United  States  are  to  receive 
a  salary  of  $7500  a  year;  in  the  event  that  mem- 
bers are  serving  in  other  departments  they  are  to 
receive  the  difference  between  their  compensation 
in  such  departments  and  the  amount  named  above. 
The  terms  of  office  of  the  several  members  are  to 
be  determined  by  the  President.  The  committee 
is  authorized  "under  rules  and  regulations  to  be  pre- 
scribed by  it  from  time  to  time,  to  investigate,  pass 
upon,  and  determine  whether  it  is  compatible  with 
the  national  interest  that  there  should  be  sold  or 
offered  for  sale  or  for  subscription  any  issue,  or  any 
part  of  any  issue,  of  securities  hereafter  issued  by 
any  person,  firm,  corporation,  or  association,  the 
total  or  aggregate  par  or  face  value  of  which  issue 
and  any  other  securities  issued  by  the  same  person, 
firm,  corporation,  or  association  since  the  passage 
of  this  Act  is  in  excess  of  $100,000."  ^  The  committee 
is  not  to  pass  upon  borrowing  for  current  account, 
or  for  renewing  or  refunding  of  indebtedness  exist- 
ing at  the  time  the  act  was  passed ;  nor  is  it  au- 
thorized to  act  on  the  resale  of  securities  where  the 
committee  has  determined  that  such  process  is  com- 
patible with  the  national  interest.  Railroad  securi- 
ties and  bonds  of  the  War  Finance  Corporation 
are  also  excluded  from  its  jurisdiction. ^  All  the 
authority  contemplated  under  the  sections  of  the 

1  Public  No.  121,  op.  ciL,  p.  9.  "  Ibid. 


WAR  CONTROL  16S 

act  outlined  above  is  to  be  brought  to  an  end  six 
months  after  the  termination  of  the  war,  as  indi- 
cated by  the  President's  proclamation. 

Like  the  old  capital  issues  committee,  the  new 
body  is  to  be  represented  by  local  organizations  in 
each  of  the  twelve  federal  reserve  districts.  An- 
nouncement to  this  effect  was  made  July  16.^  Each 
of  the  district  organizations  is  composed  of  a  number 
of  bankers  and  business  men.  It  is  the  intention  of 
the  new  committee  to  have  the  district  bodies  act 
definitely  upon  applications  for  the  issue  of  securities 
amounting  to  $100,000  or  less,  and  to  advise  the 
main  committee  at  Washington  where  applications 
involve  larger  amounts.  According  to  the  an- 
nouncement of  Chairman  Charles  S.  Hamlin  of  the 
central  organization,^  "the  Capital  Issues  Com- 
mittee also  has  the  benefit  of  the  advice  of  all  other 
departments  and  branches  of  the  Government,  in- 
cluding the  Food,  Fuel,  and  Railway  Administra- 
tion, the  War  Industries  Board  and  other  agencies 
having  knowledge  of  the  requirements  of  essential 
war  industries."  It  is  obvious  from  this  announce- 
ment that  there  will  be  cooperation  among  the 
various  government  factors  of  control,  and  that 
thereby  the  regulations  will  be  all  the  more  effective. 
For  its  guidance,  the  Committee  will  undoubtedly 
adopt  fundamental  principles  similar  to  those  em- 
ployed by  the  old  committee,^  but  because  of  its 
more  certain  sources  of  information,  through  the 

1  Wall  St.  Jour.,  July  16,  1918.  « Ibid. 

'  Cf.  ante,  p.  159. 


164        PROBLEMS  OF  RECONSTRUCTION 

government  departments,  its  work  will  be  far  more 
thorough  than  that  of  its  predecessor. 

The  sections  discussed  above  are  a  part  of  the 
act  which  authorizes  the  creation  of  the  War  Finance 
Corporation.  It  goes  without  saying  that  this 
organization  is  a  part  of  the  war  policy  of  the  United 
States.  There  has  been  much  criticism  of  the  new 
measure ;  the  question  has  been  raised  as  to  its 
necessity ;  more  recently  doubts  have  arisen  as  to 
how  the  corporation  should  exercise  its  functions.^ 
But  much  of  the  fear  of  the  prospective  power  of 
the  corporation  seems  to  be  based  on  the  new  prin- 
ciples involved  rather  than  on  a  forecast  of  the 
work  it  will  actually  be  called  on  to  accomplish. 
It  is  optional  with  the  borrower  whether  he  uses  its 
facilities  or  not ;  with  the  Capital  Issues  Commit- 
tee carefully  scrutinizing  issues,  only  those  industries 
essential  for  the  national  interest  will  be  able  to  ob- 
tain assistance.  Indeed,  to  date,  nearly  five  months 
after  the  passage  of  the  act,  there  has  been  but 
small  demand  for  its  assistance.  The  aggregate  of 
the  large  loans  is  only  about  $41, 655, 000.^  The  real 
danger  lies  in  the  fact  that  the  principle  of  govern- 
mental aid  in  financing  of  industries  once  having 

iWall  St.  Jour.,  Jan.  31,  1918;  March  4,  1918;  March  12,  1918; 
March  19,  1918;  April  4,  1918;  April  22,  1918;  May  29,  1918;  June 
6,  1918;  June  13,  1918;  August  10,  1918;  Economic  World,  Feb.  2, 
1918,  p.  147;  Bulletin  of  the  Nat.  City  Bank  (N.  Y.),  Feb.  1918,  p.  6; 
Com.  and  Fin.  Chron.,  Feb.  2,  1918,  p.  439;  Feb.  9,  1918,  p.  541 ;  Feb. 
16,  1918,  p.  654;  March  2,  1918,  p.  868;  March  16,  1918,  p.  1081; 
March  23,  1918.  p.  1188. 

»  Wall  St.  Jour.,  Aug.  16,  1918. 


WAR  CONTROL  165 

been  established  during  the  war  period,  the  War 
Finance  Corporation  may  be  continued  for  recon- 
struction purposes,  or  that  some  similar  institution 
may  be  inaugurated  to  aid  the  financing  of  industry. 
According  to  the  terms  of  the  act,  the  Corporation 
is  to  have  a  capital  of  $500,000,000,  all  of  which  is 
to  be  subscribed  by  the  United  States.^  The  man- 
agement of  the  institution  is  in  the  hands  of  a  board 
of  directors  composed  of  the  Secretary  of  the  Treas- 
ury, who  is  chairman,  and  four  other  members 
chosen  by  the  President  with  the  consent  of  the 
Senate.  The  organization  has  many  of  the  cus- 
tomary powers  of  other  corporations ;  ^  in  addition, 
it  is  authorized  under  certain  conditions  to  make 
advances  to  banks  and  trust  companies  which  have 
outstanding  any  loan  or  loans  to  establishments 
whose  operations  are  necessary  or  contributory  to  the 
prosecution  of  the  war,  or  where  such  banks  or  trust 
companies  have  rendered  financial  assistance  to  such 
industries.  Under  certain  conditions,  the  Cor- 
poration may  make  advances  to  banks  of  various 
descriptions  and  to  building  and  loan  associations. 
In  exceptional  cases  it  may  loan  directly  to  persons, 
firms,  corporations,  or  associations  where  the  loan 
contributes  to  the  war  ends  of  the  Government.  It 
is  authorized  to  buy  and  sell  United  States  bonds, 
to  issue  bonds  of  its  own,  and  the  federal  reserve 
banks  are  empowered  to  discount  the  direct  obli- 
gations of  the  Corporation  and  to  issue  federal  re- 
serve notes  on  such  security.     The  bonds   of  the 

1  Public  No.  121,  op.  cit.,  sec.  2.  2  jhi^_^  ggc.  6. 


166        PROBLEMS  OF  RECONSTRUCTION 

Corporation  are  exempt  from  taxation.     Meanwhile 
the  United  States  is  not  responsible  for  its  debts. ^ 

Secretary  McAdoo  explained  that  this  measure  is 
intended  primarily  to  enable  banks,  including  na- 
tional and  state  banks  and  trust  companies,  to  con- 
tinue to  furnish  essential  credits  for  enterprises  which 
are  necessary  or  contributory  to  the  prosecution  of 
the  war.  He  urged  that  government  borrowing 
tended  to  preempt  the  credit  facilities  of  the  banks 
and  thereby  to  curtail  their  customary  assistance  to 
industries,  that  the  federal  reserve  banks  were  not 
authorized  to  handle  the  business  required  of  the 
Corporation,  and  that  this  institution  was  designed 
as  an  emergency  measure  to  fill  the  gap.  He  be- 
lieved that  the  mere  existence  of  the  machinery 
provided  by  the  act  would  of  itself  maintain  con- 
fidence to  such  an  extent  that  the  aid  of  the  Cor- 
poration would  be  called  for  only  in  a  relatively  few 
cases. ^  Subsequently,  the  officials  of  the  Corpo- 
ration explained  that  "an  erroneous  impression 
seems  to  exist  in  certain  quarters  that  the  Corpora- 
tion is  intended  primarily  to  make  direct  advances 
to  borrowers  under  the  'exceptional  cases'  clause  of 
the  act.  This,  however,  is  not  the  purpose  of  the 
act,  which  was  designed  primarily  to  enable  credit 
to  be  extended  by  the  War  Finance  Corporation 
through  the  banks  of  the  country  to  'war  indus- 
tries,' that  is,  to  those  industries  whose  operations 
are   necessary   or   contributory   to   the   war." '     It 

1  Public  No.  121,  op.cit.,  sec.  7  to  16. 

*  O.  B.,  Feb.  2,  1918,  pp.  1  and  7.  » Ibid.,  June  6,  1918,  p.  16. 


WAR  CONTROL  167 

may  be  added  in  this  connection,  that  the  Secretary, 
in  August,  announced  that  the  War  Finance  Cor- 
poration would  make  direct  loans  to  individuals, 
firms,  and  corporations  whose  principal  business  is 
raising  of  livestock.  The  authority  for  this  policy 
is  the  *' exceptional  clause."  ^  The  Federal  Re- 
serve Banks  of  Kansas  City  and  Dallas  were 
designated  agencies  for  this  business. 

We  said  in  the  outline  of  this  chapter  that  one  of 
the  objects  of  federal  control  was  means  of  com- 
munication. Prior  to  the  taking  over  of  the  rail- 
roads by  the  Government,  the  transportation  sys- 
tems of  the  country  were  managed  by  the  Railroad 
War  Board  organized  under  a  resolution  adopted  by 
the  chief  executive  ofiicers  of  the  principal  roads  at 
a  convention  held  on  April  11,  1917 ;  this  action  was 
subsequently  ratified  by  the  various  railway  cor- 
porations. The  purpose  of  this  body  was  to  co- 
ordinate the  operation  of  the  railroads  into  a  "con- 
tinental railway  system"  to  aid  the  Government 
during  the  war.^  Innumerable  problems  were  en- 
countered, and  the  growing  difficulties  became  all  the 
more  apparent  with  the  advance  of  the  winter  of 
1917-1918.  Included  in  the  list  were  questions 
of  rates,  wages,  priorities,  and  the  raising  of  capital 
needed  to  improve  the  roads.  Indeed,  there  was  in 
addition  the  immediate  and  pressing  problem  of  the 
ability  of  the  roads  to  handle  the  tremendous  traffic 
offered  as  one  of  the  results  of  the  war.     The  Rail- 

»  Wall  St.  Jour.,  Aug.  17,  1918. 
«  O.  B.,  Jan.  2,  1918,  p.  5. 


168        PROBLEMS  OF  RECONSTRUCTION 

road  War  Board  admitted  that  "trying  conditions 
are  certain  to  develop  this  winter  because  of  the  in- 
abihty  of  the  carriers  to  take  care  of  the  increasing 
traffic,"  and  that  "the  transportation  situation  is 
becoming  the  subject  of  growing  pubhc  uneasiness 
and  agitation."  Therefore,  the  Board  deemed  it 
proper  to  "make  pubhc  a  frank  statement  and  ex- 
planation of  the  facts  and  indicate  some  of  the 
means  which  it  believes  should  be  used  in  dealing 
with  the  situation."  ^  One  part  of  the  plan  was 
the  elimination  from  transportation  in  whole  or  in 
part  of  upwards  of  450  articles  which  the  Board 
believed  could  be  dispensed  with  without  any 
serious  inconvenience.^ 

Federal  control  was  brought  a  step  nearer  as  a 
result  of  the  report  of  the  Interstate  Commerce 
Commission  directed  to  Congress  on  December  1. 
Two  methods  of  meeting  the  situation  were  sug- 
gested. First,  the  operation  of  the  roads  as  a  unit 
by  the  carriers  themselves.  This  was  rejected,  for, 
according  to  the  Commission,  "in  the  effort  along 
this  line  initiated  early  in  this  year  they  are  re- 
stricted by  state  and  federal  law,  and  the  idea  is 
the  antithesis  of  that  which  heretofore  has  con- 
trolled their  activities."  *  The  alternative  method 
was  the  "operation  as  a  unit  by  the  President  dur- 
ing the  period  of  the  war  as  a  war  measure  under 
the  war  powers  vested  in  him  by  the  Constitution 
and  those  which  have  been  or  may  be  conferred  by 

1  O.  B.,  Nov.  20.  1917,  p.  1 ;   Bus.  Dig.,  Nov.  28,  1917.  p.  380. 
«  O.  B.,  Dec.  6,  1917,  p.  6.  s  /j^^/. 


WAR  CONTROL  169 

the  Congress."  ^  Meanwhile,  the  Federal  Trade 
Commission  added  its  contribution  to  the  solution 
of  the  problem  by  confirming  the  statement  of  the 
Interstate  Commerce  Commission  that  "the  coal 
industry  is  paralyzing  the  industries  of  the  country, 
and  that  the  coal  industry  itself  is  paralyzed  by  the 
failure  of  transportation."  ^ 

There  was  no  question  that  the  outlook  was  bad 
and  that  federal  control  was  inevitable.  Unified 
operation  was  already  forecasted  in  the  plan  of  the 
railroads  themselves  announced  late  in  November 
by  which  all  the  available  facilities  east  of  Chicago 
were  to  be  pooled  to  the  extent  necessary  to  furnish 
the  maximum  freight  movement.^  Under  authority 
of  the  act  of  August  29,  1916,  President  Wilson,  by 
proclamation  of  December  26,  1917,  authorized 
federal  control  of  the  railroads.^  The  proclama- 
tion covered  "each  and  every  system  of  transporta- 
tion and  the  appurtenances  thereof  located  wholly 
or  in  part  within  the  boundaries  of  the  continen- 
tal United  States  and  consisting  of  railroads,  and 
owned  or  controlled  systems  of  coastwise  and  inland 
transportation,  engaged  in  general  transportation, 
whether  operated  by  steam  or  by  electric  power, 
including  also  terminals,  terminal  companies,  and 
terminal  associations,  sleeping  and  parlor  cars, 
private  cars  and  private  car  lines,  elevators,  ware- 
houses, telegraph  and  telephone  lines,  and  all  other 
equipment   and   appurtenances   commonly   used   or 

1  O.  B.,  Dec.  6,  1917,  p.  6.  «  Bus.  Dig.,  Nov.  28,  1917,  p.  380. 

« Ibid.,  Dec.  14,  1917,  p.  6.  ■»  Cf.  Public  No.  242,  64th  Cong. 


170        PROBLEMS  OF  RECONSTRUCTION 

operated  as  a  part  of  such  rail  and  water  systems  of 
transportation.  .  .  ."  ^  Street  railways  and  inter- 
urban  lines  were  not  included  in  the  proclamation, 
but  the  President  announced  that,  if  later  the  step 
were  necessary,  these  might  be  taken  over  also. 
President  Wilson  explained  that  federal  control  of 
railroads  was  "imperatively  necessary,"  that  this 
was  a  war  of  resources  as  well  as  of  men,  and  that 
complete  mobilization  of  the  resources  of  the  coun- 
try required  that  the  transportation  systems  should 
be  organized  and  employed  under  a  single  authority.^ 
Secretary  McAdoo  was  appointed  Director-Gen- 
eral of  the  railroads,  and  a  new  organization  was 
effected  by  which  control  was  unified  under  his  direc- 
tion. Subsequently,  the  Railroad  Control  Act  of 
March  21,  1918,  provided  the  financial  arrange- 
ments while  the  roads  are  under  Government  man- 
agement. This  act  authorized  the  President  to 
make  agreements  with  the  carriers  and  to  guarantee 
just  compensation,  which  was  not  to  exceed  a  sum 
equivalent  to  the  average  annual  railway  operating 
income  for  the  three  years  ending  June  30,  1917.^ 
Any  income  in  excess  of  that  amount  is  to  remain 
the  property  of  the  United  States.  All  agreements 
are  to  contain  appropriate  provisions  for  the  main- 
tenance, repair,  renewals,  and  depreciation  of  the 
properties,  for  the  creation  of  reserve  funds  in  con- 
nection with  such  arrangements,  and  for  adequate 
accounting    and    adjustment    charges    so    that    the 

1  O.  B.,  Dec.  27,  1917,  pp.  1  and  2.  » Ibid. 

8  Public  No.  107,  65th  Cong.  (S.  3752),  p.  1. 


WAR  CONTROL  171 

property  of  each  carrier  "may  be  returned  to  it  in 
substantially  as  good  repair  and  in  substantially  as 
complete  equipment  as  it  was  in  at  the  beginning 
of  federal  control."  ^  In  the  case  of  railroads  in 
the  hands  of  receivers,  or  with  expenditures  for 
additions  and  equipment  not  reflected  in  their 
operating  income,  the  President  is  to  make  such 
agreements  for  compensation  as  will  be  just  under 
the  circumstances.  The  act  provides  a  "revolving 
fund"  of  $500,000,000  to  be  used  to  pay  the  ex- 
penses of  federal  control,  to  give  a  just  recompense 
to  the  owners,  to  provide  for  motive  power,  terminals, 
cars,  and  other  necessary  equipment.  The  President 
may  direct  carriers  to  make  improvements ;  he  may 
initiate  rates,  fares,  charges,  classifications,  and  regu- 
lations by  filing  the  same  with  the  Interstate  Com- 
merce Commission ;  he  may  also  select  appropriate 
agencies  for  carrying  out  the  provisions  of  the  act. 
Federal  control,  as  provided  by  the  act,  is  to  con- 
tinue through  the  war  period  and  for  a  reasonable 
time  thereafter,  but  not  longer  than  a  year  and  nine 
months  after  the  treaty  of  peace  as  indicated  by 
the  President's  proclamation.^ 

The  Director-General  has  recently  announced  his 
policy  of  railroad  administration.  This  includes 
"the  service  of  the  public,"  which  implies  the  main- 
tenance and  improvement  of  the  railroad  properties 
to  afford  adequate  transportation  at  the  lowest 
cost.     A  second  element  in  the  policy  is  the  pro- 

1  Public  No.  107,  erAh  Cong.  (S.  3752),  p.  2. 
'  Ibid.,  sections  2  to  12. 


172        PROBLEMS  OF  RECONSTRUCTION 

motion  of  a  spirit  of  sympathy  and  better  under- 
standing between  the  employees  and  the  railroad 
administration,  and  between  the  administration  and 
the  public;  and  a  third  element  involves  the  ef- 
fecting of  sound  economies.  This  last,  according 
to  the  Director-General,  includes  elimination  of 
superfluous  expenditures,  payment  of  a  fair  living 
wage  for  services  rendered,  purchase  of  materials 
and  equipment  at  the  lowest  price  consistent  with 
reasonable  profits  to  producers,  standardizing  equip- 
ment, direct  routeing  of  freight  wherever  possible, 
intensive  employment  of  all  equipment,  and  a 
careful  scientific  study  of  the  results  obtained.^ 

Another  step  in  extending  federal  control  over 
the  communication  system  of  the  country  was  taken 
on  July  22, 1918,  when  the  President  by  proclamation 
took  over  the  telegraph  and  telephone  systems,  and 
directed  that  the  control  should  be  exercised  by  the 
Postmaster-General.  Authority  for  this  measure 
was  granted  by  joint  resolution  of  Congress  on 
July  16,  1918.2 

The  control  of  the  shipping  and  shipbuilding  pro- 
gram of  the  United  States  is  under  the  direction  of 
the  Shipping  Board.  This  organization  was  au- 
thorized by  the  act  of  September  7,  1916,^  and  was 
designed  originally  as  a  part  of  the  administrative 
machinery  of  the  Government  to  promote  the  de- 
velopment of  an  American  merchant  marine  and  to 

iQ.  B.,  June  19,  1918,  pp.  1  and  4. 

^Ibid..  July  24,  1918,  p.  1. 

»  Public  No.  260,  64th  Congress  (H.  R.  15455),  Sect.  3. 


WAR  CONTROL  173 

regulate  foreign  and  domestic  shipping.^  The  needs 
of  the  war,  however,  have  brought  new  functions 
to  this  body.  Training  men  for  various  branches 
of  the  marine  service,  requisitioning  and  control  of 
vessels  under  the  jurisdiction  of  the  United  States, 
and  the  direction  of  the  shipbuilding  program  of  the 
United  States  are  among  its  new  duties.  On  April 
16,  1917,  the  Board  organized  the  United  States 
Emergency  Fleet  Corporation  under  the  laws  of  the 
District  of  Columbia  with  a  capital  of  $50,000,000.^ 
The  magnitude  of  the  operations  of  this  agency  is 
indicated  by  the  fact  that  on  December  1,  1917,  it 
was  supervising  the  construction  of  1118  vessels  in 
116  shipyards,  and  disbursing  for  this  work  over  a 
billion  dollars  a  year.^  This  signifies  that  sub- 
stantially all  the  shipbuilding  of  the  country,  ex- 
cept naval  vessels,  is  under  its  control.  In  com- 
mandeering vessels  the  Board  has  followed  chiefly 
two  principles,  namely,  that  the  United  States  "was 
entitled  to  the  privilege  of  serving  the  allied  cause 
under  her  own  rather  than  under  a  foreign  flag," 
hence  the  commandeered  ships  have  been  retained 
by  this  country;  and  second,  that  the  "former 
owners  of  vessels  building  for  American  account 
and  commandeered  on  August  3,  1917,  should  be 
given  an  opportunity  to  resume  title  on  the  com- 
pletion of  such  vessels,  provided  they  would  sur- 
render to  the  Board  the  use  of  such  vessels,  for  the 

'  First  Annual  Report  of  the  United  States  Shipping  Board  (1917),  p.  6. 
» Ibid.,  p.  7, 
'Ibid.,  p.  10. 


174        PROBLEMS  OF  RECONSTRUCTION 

period  of  the  war  and  six  months  thereafter,  at  the 
requisition  rate  estabhshed  by  the  Board,  and  pro- 
vided further  that  they^would  reimburse  the  Board 
for  all  expenditures  incurred  in  completing  the 
vessels,  including  the  cost  of  speeding  up  construc- 
tion, and  would  waive  all  claims  arising  out  of  the 
act  of  requisitioning."  ^ 

The  conservation  and  price-fixing  measures  hith- 
erto discussed  refer  principally  to  domestic  consum- 
ers; but  these  regulations  scarcely  touch  another 
field  where  control  in  war  times  is  necessary.  This 
is  the  field  of  government  purchase.  Here,  con- 
trol is  designed  to  obtain  commodities  at  a  reason- 
able advance  above  cost,  to  secure  a  steady  supply 
and  a  scale  of  preference  for  government  orders ; 
hence  the  policies  of  price  fixing,  priorities,  and 
standardization . 

Prices  and  conditions  of  sale  are  fixed  from  time 
to  time  for  a  number  of  great  commodities,  such  as 
iron  and  steel,  copper,  zinc,  aluminum,  timber, 
leather,  wool,  and  cotton  goods.  The  customary 
process  is  for  the  Federal  Trade  Commission  to  ob- 
tain the  cost  of  production  of  the  goods  in  question 
and  on  this  basis  the  War  Industries  Board  agrees 
on  a  price  with  the  representatives  of  the  industry.^ 
The  price  fixing  committee  of  this  Board  was  cre- 
ated in  March  1918  and  charged  with  the  duty  of 
passing  on   the  price   of  all  basic  raw  materials.^ 

1  First  Annual  Report  of  the  U.  S.  Shipping  Board  (1917),  p.  10.     Cf. 
also  Rules  and  Regulations  of  the  U.  S.  Shipping  Board  (August  1917). 
»  Cf.  ante,  p.  24. 
»  O.  B.,  March  19,  1918,  p.  1 ;   Bus.  Dig.,  March  27,  1918,  p.  423. 


WAR   CONTROL  175 

Many  agreements  contain  other  than  price  arrange- 
ments. For  example,  in  the  case  of  steel,  the  con- 
tract provided  that  there  should  be  no  reduction  in 
wages,  that  the  stipulated  price  applied  not  only  to 
government  purchases,  but  also  to  those  of  the 
Allies  and  the  American  consumer,  and  that  the 
steel  men  should  exert  themselves  to  keep  production 
at  the  maximum.^  Many  other  agreements  contain 
similar  stipulations. ^ 

Priority  arrangements  are  necessary  because  of 
the  limited  supply  of  certain  factors  of  production. 
The  preference  idea  is  widely  applied  in  organizing 
the  country  for  war.  Indeed,  much  of  the  regula- 
tion of  commerce  and  of  the  supply  of  labor  partakes 
of  this  idea.  In  short,  both  industrial  and  domestic 
consumers  are  graded  in  relation  to  the  war  needs 
of  the  country.  The  notable  instance  of  the  appli- 
cation of  this  principle  is  with  iron  and  steel.  Ow- 
ing to  the  great  importance  of  the  product  and  to 
the  limited  supply,  it  is  necessary  to  prescribe  the 
order  in  which  certain  articles  shall  be  supplied. 
By  a  recent  arrangement,  steel  products  are  di- 
vided into  five  general  groups.  Class  AA  comprises 
only  emergency  work  of  an  exceptional  and  urgent 
nature;    Class  A  covers  all  other  war  work;    Class 

»  O.  B.,  Sept.  25,  1917,  p.  2. 

*  The  following  references  for  1917  :  O.  B.,  Aug.  7,  p.  2;  Aug.  9,  p.  1 
Sept.  21,  p.  1 ;  Sept.  25,  p.  2;  Oct.  9,  p.  7;  Nov.  6,  p.  3;  Dec.  29,  p.  1 
The  following  for  1918:  Jan.  11,  p.  2;  March  5,  p.  3;  May  2,  p.  2 
May  9,  p.  12;  May  29,  pp.  2  and  5 ;  June  10,  pp.  1  and  8;  July  5,  p.  4 
July  23,  p.  1.  Bus.  Dig.,  Oct.,  1917,  p.  107;  Nov.  14,  1917,  p.  320 
Jan.  16.  1918,  p.  98;   Jan.  23,  1918,  p.  135. 


176        PROBLEMS  OF  RECONSTRUCTION 

B  includes  work  which,  while  not  primarily  for  war 
purposes,  is  essential  for  the  national  welfare ;  Class 
C  comprises  all  orders  not  covered  by  priority  cer- 
tificates or  not  taking  an  automatic  rating;  all 
other  work  falls  in  Class  D.^  To  make  sure  that 
the  orders  will  be  filled  in  their  rank  of  importance 
these  classes  are  defined  with  considerable  minute- 
ness. As  early  as  February  4,  1918,  the  War  In- 
dustries Board,  for  the  purpose  of  expediting  pro- 
duction, inaugurated  an  extensive  system  of  prior- 
ities, applying  not  only  to  iron  and  steel,  but  among 
others  to  copper,  chemicals,  cotton  duck,  and  woolen 
cloth.2 

Standardization  has  been  tried  on  a  limited  scale 
in  the  United  States.  It  is  largely  a  conservation 
measure  designed  to  cut  down  the  number  of  styles 
or  classes  of  products  and  thus  save  capital,  labor, 
and  materials,  and  effect  various  economies  in  manu- 
facture and  distribution.  As  in  the  case  of  price 
control,  it  is  effected  by  agreement  with  the  repre- 
sentatives of  the  industries  concerned.  Among  the 
commodities  to  which  it  has  been  applied  are  farm 
implements,  certain  kinds  of  clothing,  shoes,  auto- 
mobile rims  and  tires,  furnaces,  and  metal  beds.^ 

A  brief  survey  of  this  chapter,  and  of  the  three 
immediately  preceding,  reminds  the  reader  that  the 
present  industrial  arrangements  are  very  different 

1  O.  B.,  July  6,  1918,  p.  9;   July  31,  1918,  p.  9. 

»Bus.  Dig.,  Feb.  13,  1918,  p.  221. 

SO.  B.,  June  17,  1918,  p.  2;  June  19,  1918,  p.  16;  June  26,  1918,  p.  3; 
July  1, 1918,  p.  9;  July  12,  1918,  p.  2;  July  16,  1918,  p.  3;  July  19, 1918, 
p.  6;  July  23,  1918,  p.  8. 


WAR  CONTROL  177 

from  those  to  which  he  was  accustomed  less  than 
two  years  ago.  Whether  one  is  a  manufacturer, 
merchant,  consumer,  or  worker  in  any  field,  the 
effect  of  war  control  Is  encountered  almost  every 
waking  hour.  In  short,  the  world  in  which  we  now 
live  is  characterized  by  regulations  and  restrictions 
to  which  we  were  not  accustomed  at  the  beginning 
of  this  conflict  and  to  which  no  previous  war  had 
introduced  us.  A  marked  change  has  resulted  in 
the  method  of  conducting  wars.  As  President  Wil- 
son has  said,  "This  is  a  war  of  resources  no  less  than 
of  men."  ^  Mobilization  involves  not  only  men, 
but  industries  and  materials,  and  necessitates  cur- 
tailments and  restraints,  and  a  control  which  makes 
these  effective.  If  regulations  encompass  us,  it  is 
largely  because  our  activities  are  not  isolated,  and 
because  the  industrial  and  social  forces  which  enter 
our  local  sphere  are  the  same  forces  which  are  work- 
ing the  world  round.  The  complexity  of  social  re- 
lations causes  regulations  to  become  all  the  more 
penetrating,  for  the  reason  that  no  branch  of  indus- 
try, no  field  of  economic  endeavor,  is  independent  of 
others.  The  developments  of  the  past  half  century 
have  produced  a  social  cooperation  which  did  not 
exist  before,  and  this,  in  turn,  has  increased  the  de- 
pendence of  man  on  man,  industry  on  industry,  and 
regions  of  the  world  on  other  regions.  Hence  control 
to  be  complete  and  effective  must  expand  without 
limit.  Regulation  is  a  "  bourne  "from  which  "  no  trav- 
eler returns."     Starting  in  a  limited  way,  it  ramifies 

1  O.  B.,  Dec.  27,  1918,  p.  1. 

N 


178        PROBLEMS  OF  RECONSTRUCTION 

indefinitely,  and  must  do  so,  to  check  each  new 
movement  arising  to  escape  the  impending  control. 
For  evidence,  witness  the  ever  increasing  demands 
of  government  commissions  which  are  constantly 
confronted  with  new  forces  they  are  unable  to  mas- 
ter. For  these  reasons,  among  others,  a  thorough 
study  of  the  problems  of  reconstruction  is  imper- 
ative; for  if  we  adopt  the  principle  of  control  as  a 
peace  policy  we  shall  be  hurried  on  rapidly  to  a 
regime  in  which  government  interference  will  be 
even  more  comprehensive  than  in  war  times. 

One  might  conclude  from  the  foregoing  paragraph 
that  the  war  measures  of  the  United  States  find  their 
counterpart  in  Europe,  and  since  industries  and  com- 
merce of  all  countries  are  intimately  related,  even 
neutrals,  far  and  near,  have  been  forced  to  adopt 
some  measure  of  control.  This,  indeed,  is  the  case. 
One  more  brief  task  confronts  us  before  we  study  the 
results  of  the  war  and  the  related  problems  of  re- 
construction, namely,  a  survey  of  war  measures  in 
other  countries. 


CHAPTER  VI 
WAR  CONTROL  IN  FOREIGN  COUNTRIES 

War  control  is  not  an  isolated  phenomenon.  It 
is  not  peculiar  to  the  United  States,  nor  even  to  the 
belligerents;  it  is  a  feature  of  all  countries  where 
the  malignant  influences  of  the  war  have  been  felt. 
Distant  regions  have  been  compelled  to  conserve 
supplies  to  protect  their  industries  and  consumers. 
In  many  instances,  the  diversion  of  shipping  has 
been  the  cause  of  food  shortage;  hence  the  need  of 
conservation  measures.  Sometimes  the  regulations 
of  the  belligerents  have  been  the  cause  of  financial 
troubles ;  hence  measures  to  protect  national  credit. 
Meanwhile,  there  has  been  a  scant  supply  of  manu- 
factured goods  in  all  countries ;  stocks  have  run 
down  and  prices  have  risen ;  this  has  often  been  the 
occasion  for  regulation  to  conserve  a  limited  supply 
and  to  prevent  extortionate  prices.  In  any  case, 
the  unusual  conditions  have  suddenly  caused  inter- 
vention by  the  governments  in  the  hope  of  alleviat- 
ing the  industrial  evils  incident  to  the  war. 

Among  the  belligerents,  regulation  covers  about 
the  same  list  of  activities  as  in  the  United  States. 
It  thus  includes  foodstuffs,  fuel,  essential  raw 
materials,  shipping  and  foreign  commerce,  and  the 
relations  between  employers  and  workmen.     Prices 

179 


180        PROBLEMS  OF  RECONSTRUCTION 

and  profits,  and  the  flow  of  foods  to  consumers, 
are  everywhere  brought  under  regulation.  The 
policies  of  requisition,  of  priority,  and  of  government 
purchase  and  distribution  of  certain  commodities  of 
prime  importance  characterize  the  war  measures  of 
all  belligerent  countries.  In  some  instances,  ration- 
ing both  of  foodstuffs  and  industrial  raw  materials 
has  been  adopted  on  a  considerable  scale.  Indeed, 
the  need  of  control  has  been  much  greater  in  the 
European  countries  than  in  the  United  States,  owing 
to  the  limited  supply  of  commodities  for  both  civil- 
ian and  military  consumption. 

In  the  case  of  European  neutrals,  control  has  been 
made  necessary  by  the  commercial  policy  adopted 
by  the  belligerents.  Where  neutrals  were  rationed, 
it  was  necessary  to  devise  means  for  rigid  economy. 
The  neutrals,  moreover,  were  compelled  to  establish 
some  sort  of  organization  to  make  effective  their 
agreements  for  the  distribution  of  products  obtained 
by  consent  of  the  countries  at  war.  We  have 
previously  discussed  the  American  method  of  regu- 
lating commerce  with  Germany's  neighbors.^  A 
similar  policy  has  been  employed  by  England, 
France,  and  Germany.  Such  organizations  as  the 
Netherlands  Overseas  Trust  and  the  Swiss  associa- 
tions are  compelled  to  control  the  products  allotted 
to  them,^  otherwise  the  exporting  countries  would 

1  Cf.  ante,  p.  154. 

»  Com.  Rept.,  March  24,  1915,  p.  1186;  Aug.  13.  1915.  p.  753;  Oct. 
27,  1915,  p.  386;  Nov.  2,  1915,  p.  466;  Nov.  26,  1915,  p.  785;  Aug.  29, 
1917,  p.  16;  June  28,  1918,  pp.  1202-1203;  Bus.  Dig.,  Sept.  12,  1917, 
p.  1432. 


WAR  CONTROL  IN   FOREIGN   COUNTRIES     181 

be  loath  to  send  them  further  suppHes.  In  addi- 
tion, the  commercial  agreements  by  which  neutrals 
engage  to  deliver  a  portion  of  their  supplies  of  cer- 
tain products  to  belligerents  in  return  for  commer- 
cial favors  make  supervision  necessary.  Thus,  even 
non-combatants  are  surrounded  with  conditions 
which  make  government  intervention  inevitable. 

It  is  no  doubt  true  that  the  neutrals  have  volun- 
tarily adopted  some  measures  for  their  own  pro- 
tection. Shortly  after  the  outbreak  of  the  war  the 
Swedish  government  decided  to  purchase  120,000 
tons  of  wheat  as  an  emergency  measure.^  In  June 
1917,  the  same  country  prohibited  the  export  of  a 
long  list  of  commodities,  including  pork,  fish^  fruits, 
certain  vegetables,  certain  chemicals,  textiles  and 
wearing  apparel,  iron,  steel,  copper,  lead,  and  zinc.^ 
About  the  same  time,  Sweden  requisitioned  all  sup- 
plies of  peas  and  pea  flour  in  excess  of  500  kilos, 
fixed  the  maximum  price  of  peas,  and  prohibited 
their  use  in  the  feeding  of  animals ; '  the  use  of 
flour,  starch,  and  bran  for  industrial  purposes  was 
prohibited,  except  with  the  permission  of  the  Agri- 
cultural Commission.  Other  measures  included  the 
requisition  of  fodder  and  cotton.'*  Early  in  the  war 
Norway  prohibited  the  export  of  surgical  instru- 
ments and  has  since  greatly  enlarged  the  list  of  non- 
exportable  goods. ^     To  assist  the  fishing  industry, 

»  Com.  Rept.,  Jan.  4,  1915,  p.  31. 

2  O.  R.,  June  21,  1917,  p.  3.         « Ibid.,  June  27,  1917,  p.  4. 

*  Ibid.,  Sept.  29,  1917,  p.  4;  Jan.  9,  1918,  p.  16. 

B  Com.  Rept.,  March  24,  1915,  p.  1185;  July  5,  1918,  p.  57. 


182        PROBLEMS  OF  RECONSTRUCTION    ' 

the  Norwegian  government  made  large  purchases 
through  one  of  its  commissions  and  provided  for  the 
sale  of  the  product.^  Denmark  and  Holland  have 
also  come  in  for  a  large  share  of  regulation.^ 

It  was  an  obvious  outcome  of  the  war  that  British 
dominions  should  regulate  commerce  and  industry 
both  for  their  own  good  and  for  thei  benefit  of  the 
mother  country.  At  an  early  date,  control  was 
inaugurated  in  New  Zealand,  Australia,  South 
Africa,  India,  and  Canada.  New  Zealand,  for  ex- 
ample, in  the  spring  of  1917,  prohibited  the  export 
of  wheat,  flour,  meat,  hides,  pelts,  and  wool,  except 
by  permission  of  the  Minister  of  Customs.^  Late 
in  1916,  through  the  good  offices  of  the  New  Zealand 
government,  the  meat  producers  of  the  country 
formed  an  agreement  with  the  British  government 
by  which  England  was  to  take  the  entire  exportable 
surplus  of  meat  from  October  20  until  at  least  three 
months  after  the  close  of  the  war.*  Similar  ar- 
rangements were  made  with  Australia  for  the  sup- 
ply of  wool,  and  with  Egypt  for  cotton.^  Early  in 
the  war,  India  put  restrictions  on  certain  exports 
and  has  since  extended  the  list ;  imports,  also, 
were  regulated.^    In  August   1917,   the  export  of 

1  Cora.  Rept.,  July  5,  1918,  p.  57. 

2  Ibid.,  Sept.  15,  1915,  p.  1307;  July  2,  1918,  p.  2;  O.  B.,  Aug.  21, 
1917,  p.  1. 

3  Com.  Rept.,  Dec.  27,  1916,  p.  1161 ;  O.  B.,  July  6,  1917,  p.  3. 
*  Ibid. 

B  Com.  Rept.,  Dec.  15,  1916,  p.  1009;  Bus.  Dig.,  Dec.  19, 1917,  p.  516. 
6  Daily  Consular  and  Trade  Reports,  Nov.  23,  1914,  p.  865 ;  Com. 
Rept.,  Jan.  24,  1917,  p.  1 ;  Aug.  17,  1918,  p.  647. 


WAR  CONTROL  IN  FOREIGN   COUNTRIES     183 

gold  was  prohibited,  except  under  license,  in  order 
to  protect  the  credit  and  currency  conditions  of  the 
country.  Canada,  also,  embarked  on  an  extensive 
system  of  control.^  One  interesting  measure  puts 
a  ban  on  idleness.  An  Order  in  Council  of  April  4, 
1918,  requires  every  male  person  in  the  Dominion 
between  the  ages  of  16  and  60  to  be  engaged  in 
some  useful  occupation. ^  This  suggests  the  laws  of 
several  of  our  own  States  and  the  more  recent  regu- 
lations of  the  national  government.^ 

The  policy  of  control  has  been  inaugurated  in 
the  Federated  Malay  States,  in  Siam,  and  in  some 
of  the  South  American  countries.^  In  Uruguay,  for 
example,  regulation  of  foodstuffs  is  in  the  hands  of 
the  National  Subsistence  Board  created  by  the  law 
of  December  20,  1917.^  Apparently,  from  the  terms 
of  the  law,  prices  are  fixed  by  the  government  on  the 
recommendation  of  the  Board.  Prices  of  bread  and 
flour  were  fixed  by  decrees  of  April  15  and  May  7, 
and  various  other  products  have  been  regulated 
from  time  to  time. 

As  with  other  unfortunate  neighbors  of  belligerent 
countries,  Spain  has  suffered  many  hardships,  and 
has  sought  to  alleviate  her  conditions  by  emergency 

1  Com.  Rept.,  March  30,  1916,  p.  1249;  June  13,  1918,  p.  1002;  July 
31,  1918,  p.  401;  Bus.  Dig.,  Dec.  5,  1917,  pp.  446-447;  O.  B.,  Sept.  18, 
1917,  p.  4. 

2  O.  B.,  May  16,  1918,  p.  6;  Bus.  Dig.,  May  8,  1918,  p.  620. 

»Bus.  Dig.,  Dec.  12,  1917,  p.  482;  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta., 
Sept.,  1917,  pp.  113-11.5;  O.  B.,  Feb.  9,  1918,  p.  5. 

*  Com.  Rept.,  March  25,  1915,  p.  1201 ;  O.  B.,  May  31,  1917,  p.  3. 
6  Com.  Rept.,  July  5.  1918,  p.  62;  July  25,  1918,  p.  326. 


184        PROBLEMS  OF  RECONSTRUCTION 

control.  War  regulations  cover  railroads,  shipping, 
food,  certain  essential  raw  materials,  and  manufac- 
tured products.  By  a  law  of  February  18,  1915, 
which  was  limited  in  operation  to  one  year,  the  gov- 
ernment was  authorized  to  provide  the  country  with 
necessary  food  products  and  raw  materials.  Sub- 
sequently, a  new  law  continued  the  leading  provi- 
sions of  the  Act  of  1915  and,  in  addition,  authorized 
the  acquisition  by  the  Treasury  of  certain  ali- 
mentary products  and  raw  materials,  and  provided 
for  sale  at  regulated  prices.^  An  act  of  October  4, 
1917,  made  provision  for  a  Commissary-General, 
who  is  given  power  to  buy  foreign  wheat,  regulate 
its  price  and  distribution,  and  to  restrict  consump- 
tion.^ 

The  Spanish  railroads  encountered  difficulties 
which  made  regulation  necessary.  The  cessation  of 
much  of  the  coastwise  trade,  on  account  of  high 
freight  rates,  threw  an  additional  burden  on  the  in- 
ternal transportation  system,  which  it  was  not  able 
to  bear,  partly  owing  to  the  impossibility  of  obtain- 
ing additional  rolling  stock.  The  government, 
therefore,  adopted  a  system  of  control.  By  a  royal 
order  of  September  21,  1916,  a  special  committee 
was  appointed  to  serve  under  the  supervision  of  the 
Director-General  of  Public  Works.  This  body  was 
authorized  to  give  preference  to  coal,  natural  fer- 
tilizers, and  to  other  commodities  of  great  impor- 
tance for  agriculture  and  manufacture.^     Regulation 

1  Com.  Rept.,  Dec.  23, 1916,  p.  1129.     [^  O.  B.,  Nov.  22, 1917,  p.  1. 
»  Com.  Rept.,  Jan.  11,  1917,  p.  130. 


WAR  CONTROL  IN   FOREIGN   COUNTRIES     185 

was  also  extended  to  the  cotton  industry.  Early  in 
1918  a  committee  was  given  power  to  establish  rules 
governing  imports,  to  distribute  stocks  of  materials 
to  the  factories,  to  fix  prices,  and  to  advise  the  gov- 
ernment regarding  rules  to  be  applied  to  the  indus- 
try.^ Meanwhile,  Spain  has  applied  the  rationing 
system  to  other  countries.  According  to  a  royal 
order,  published  April  24,  1918,  the  export  of  olive 
oil  of  recognized  brands  is  to  be  supplied  to  Amer- 
ican countries  on  the  basis  of  shipments  during  the 
years  from  1912  to  1916.  No  country  is  to  be  al- 
lowed more  than  its  share.  All  exports  of  the  prod- 
uct are  subject  to  control,  and  licenses  are  revocable 
at  any  time  by  the  National  Commission  on  Sup- 
plies.^ 

Among  the  belligerents,  Italy  has  adopted  a  full 
schedule  of  regulations.  Her  greater  distance  from 
the  sources  of  supply  of  some  of  the  leading  food- 
stuffs and  raw  materials  for  manufactures  made  her 
situation  more  critical  than  any  of  the  more  western 
countries  of  Europe.  Besides,  on  account  of  the 
shortage  of  shipping,  it  was  diflScult  for  her  to  mar- 
ket her  own  products.  While  the  task  of  organizing 
for  war  was  therefore  unusually  great,  on  the  other 
hand,  the  question  of  meeting  her  obligations  abroad, 
due  in  part  to  the  inability  to  dispose  of  her  com- 
modities, caused  trouble.  The  food  supply  was,  of 
course,  a  matter  of  first  concern.  In  addition  to 
the  customary  price  regulations,  Italy,  by  a  minis- 
terial decree  of  May  30,  1917,  made  obligatory  the 

1  O.  B.,  April  25,  1918,  p.  6.  2  75^^.^  May  2,  1918,  p.  3. 


186        PROBLEMS  OF  RECONSTRUCTION 

declaration  of  crops  of  wheat,  rye,  oats,  and  barley. 
Proprietors,  lessees,  and  cultivators  were  required 
not  only  to  declare  the  entire  amount  harvested, 
but  to  state  the  portion  set  aside  for  seed  purposes 
and  for  the  pay  of  operators  of  threshing  machines. 
Definite  information  was  demanded,  so  that  the 
farmer  had  small  chance  of  evasion.  He  was  to 
state  the  commune  in  which  his  property  was  lo- 
cated, the  location  within  the  commune,  the  name  of 
the  title  holder,  the  amount  of  cereals  harvested, 
the  amount  required  for  seed,  the  number  of  persons 
and  dependents  in  his  household,  and  the  location 
of  the  warehouse  in  which  his  grain  was  stored.^ 
Unlike  control  in  the  United  States,  regulation 
reached  the  farmers ;  it  was  designed  to  prevent  the 
withholding  or  misusing  of  supplies. 

When  the  prospect  of  shortage  in  1918  became 
evident,  Italy  adopted  more  rigid  measures.  The 
government  made  obligatory  the  cultivation  of  cer- 
tain staples  on  areas  in  excess  of  those  farmed  the 
preceding  year.  It  was  decreed  that,  during  1918, 
an  additional  74,000  acres  should  be  put  under  cul- 
tivation. That  a  fair  allotment  might  be  made,  a 
certain  specified  additional  area  was  assigned  to  the 
several  provinces.  Meanwhile,  the  cultivation  of 
potatoes,  corn,  and  vegetables  was  given  preference 
over  certain  other  crops,  such  as  clover  and  forage.^ 
An  order  of  July  30,  1917,  required  a  certain  pro- 
portion of  flour  to  be  obtained  from  wheat,  and  pro- 
hibited the  elimination  in  the  milling  process  of  any 

1  O.  B.,  July  9,  1917,  p.  4.  a  Ibid.,  April  26,  1918,  p.  5.  ' 


WAR  CONTROL  IN  FOREIGN  COUNTRIES     187 

other  substance  than  bran.  Health  officers  were 
required  to  make  frequent  tours  of  inspection  to 
repress  adulteration  and  to  prevent  divergencies 
from  the  regulations.^ 

Shortly  after  Italy  entered  the  war,  the  govern- 
ment took  up  the  sugar  problem.  A  commission 
was  created  in  the  Ministry  of  Agriculture  to  regu- 
late consumption ;  government  inspectors  were  ap- 
pointed at  all  refineries.  Sugar  could  not  be  dis- 
patched or  delivered  without  official  sanction.  The 
commission  was  authorized  to  allot  monthly  the 
supply  for  each  province  both  for  direct  consump- 
tion and  for  manufacture.  Local  officials,  in  turn, 
carried  out  the  regulations  within  the  districts. 
The  manufacture  of  any  product  containing  sugar 
was  prohibited  unless  the  producer  obtained  a 
license.' 

Foreign  trade  was  also  brought  under  control. 
To  conserve  tonnage,  and  to  prevent  an  embar- 
rassing exchange  situation,  the  Italian  government 
early  in  the  war  prohibited  the  import  of  many 
luxuries.^  The  list  has  been  extended  from  time  to 
time.  A  decree  of  May  26,  1918,  put  all  imports 
under  license,  except  commodities  intended  for  the 
use  of  the  nation.  Imprisonment,  fines,  and  con- 
fiscation of  property  were  prescribed  in  case  of 
violation    of    the    decrees.^     Effective    control    of 

»  0.  B.,  Sept.  12,  1917,  p.  4. 

»  Com.  Rept.,  Dec.  6,  1916,  p.  881. 

»Ibid.,  June  22.  1915,  p.  1313;  June  8,  1916,  p.  913. 

*  Ibid.,  June  17,  1918,  p.  1041. 


188        PROBLEMS  OF  RECONSTRUCTION 

foreign  commerce  also  involved  the  control  of  ex- 
change. This  step  was  taken  early  in  1918,  when  a 
National  Institute  of  Exchange  was  created  to  take 
charge  of  the  many  operations  connected  with  for- 
eign financial  transactions.  This  body  is  to  pur- 
chase securities,  foreign  drafts  and  notes,  to  collect 
the  proceeds  of  securities  sold  abroad,  and  to  cash 
coupons.^  In  short,  the  Institute  is  to  have  a  mo- 
nopoly of  the  foreign  exchange  business,  for  the  pur- 
pose both  of  stabilizing  the  rate  of  the  lira  and  of 
protecting  the  financial  resources  of  the  country. 
The  Institute  is  administered  by  a  council  of  about 
nine  members,  of  whom  two  are  nominated  jointly 
by  the  Ministers  of  the  Treasury  and  of  Commerce 
and  Labor,  three  are  representatives  of  the  banks  of 
issue,  and  the  remaining  members  are  selected  from 
other  credit  institutions  which  are  permitted  to 
participate  in  the  association. 

Among  domestic  industries,  the  manufactures  of 
cottons  and  woolens  were  promptly  brought  under 
regulation.  These  industries  are  of  the  greatest 
importance  both  for  civilian  and  military  purposes ; 
it  was  therefore  deemed  necessary  to  stabilize  prices 
and  to  secure  an  adequate  distribution  of  the  prod- 
ucts among  all  classes  of  consumers.  According 
to  an  official  announcement  of  August  29,  1917,  the 
government  proposed  to  create  a  committee  on  the 
cotton  industry  as  a  part  of  the  Ministry  of  Industry, 
Commerce,  and  Labor.  Its  functions  were  to  pro- 
vide for  supplies  of  raw  materials,  regulate  produc- 

1  O.  B.,  Feb.  6,  1918,  p.  7;   Bus.  Dig.,  May  8,  1918,  p.  618. 


WAR  CONTROL  IN   FOREIGN   COUNTRIES     189 

tion  so  as  to  secure  fair  prices  and  a  satisfactory  dis- 
tribution of  the  products  among  civilian  and  army 
consumers,  and  to  see  that  exports  were  maintained 
as  far  as  possible,  because  it  was  deemed  wise  to 
support  a  certain  amount  of  foreign  commerce  in 
the  national  interest.^ 

In  the  case  of  wool,  both  the  existing  stock  and 
the  prospective  clip  were  requisitioned  in  May  1917. 
The  decree  provided  for  assembling  depots  to  which 
the  new  season's  output  was  to  be  taken ;  growers 
were  to  be  reimbursed  the  cost  of  transportation 
plus  a  reasonable  amount  for  wool.^  By  a  decree 
made  public  August  4,  1917,  a  central  committee 
on  the  woolen  industry  was  created,  consisting  of 
not  more  than  fifteen  members,  and  composed  of 
civil  and  military  officials  and  representatives  of  the 
industry.  The  powers  and  functions  were  similar 
to  those  of  the  cotton  committee.  Authority  was 
given  to  requisition  factories  and  provide  for  their 
operation.  The  committee  was  expected  to  control 
production  and  distribution  of  woolens  for  the  civil 
population  and  to  standardize  certain  products.^ 

A  system  of  control  was  also  established  for  the 
boot  and  shoe  industry.  As  with  cottons  and 
woolens,  the  agency  of  control  was  a  central  com- 
mittee acting  under  the  direction  of  the  Ministry  of 
Industry,  Commerce,  and  Labor.  One  object  in 
view  was  to  supply  foot-wear  to  the  civilian  popula- 
tion at  fair  prices.     The  Ministry  was  authorized  to 

1  O.  B.,  Oct.  24,  1917,  p.  4.         ^  Ibid.,  June  26,  1917,  p.  4. 
»  Bus.  Dig.,  Oct.  17,  1917,  p.  150;  O.  B.,  Sept.  7,  1917,  p.  2. 


190        PROBLEMS  OF  RECONSTRUCTION 

order  the  production  of  standard  styles,  to  deter- 
mine prices,  and  to  allot  production  among  the 
factories.  Raw  materials  were  to  be  delivered  to 
the  establishments  in  proportion  to  the  assignment 
of  orders.  Thus,  the  Ministry  was  to  determine 
"the  types  of  foot-wear  which  may  be  put  upon  the 
market,  rules  deemed  opportune  for  rendering  con- 
sumption proportionate  to  output,  and  regulations 
so  that  foot-wear  made  in  conformity  with  this  de- 
cree shall  be  sold  at  prices  favoring  the  poorer 
classes."  ^  Products  were  to  bear  on  the  outside  a 
stamp  indicating  the  selling  price  and  the  name  of 
the  factory  at  which  production  took  place.  Even 
imported  boots  and  shoes,  after  December  1,  1917, 
were  to  be  stamped.  A  report  from  the  American 
consul  at  Milan  in  the  latter  part  of  this  year  indi- 
cated that  the  largest  shoe  establishments  had  be- 
gun to  manufacture  standard  products,  that  the 
government  had  inaugurated  a  system  of  sales  of 
shoes  to  the  public,  and  that  stores  had  been  estab- 
lished in  the  principal  cities  which  were  engaged 
exclusively  in  the  sale  of  standard  shoes.  The 
business  was  controlled  by  government  authorities.^ 
In  view  of  the  food  shortage,  the  regulation  of 
public  eating  places  was  inevitable.  By  a  decree  of 
the  Commissary-General,  made  public  the  latter 
part  of  1917,  restaurants,  hotels,  and  other  public 
rooms  in  which  food  was  consumed  were  required 
to  serve  bread  in  slices  of  not  more  than  two  cen- 
timeters thickness,  and  not  exceeding  eighty  grams 

1  O.  B.,  Dec.  31,  1917,  p.  9.  *  Ibid.,  Jan.  9,  1918,  p.  4. 


WAR  CONTROL  IN  FOREIGN  COUNTRIES     191 

for  each  meal.  Mayors  of  the  communes  were  ex- 
pected to  compile  lists  of  refreshment  rooms.  In 
such  places,  the  bread  portion  was  not  to  exceed  150 
grams.  If,  however,  the  commune  had  previously 
established  individual  rations,  in  accordance  with 
the  decree  of  September  11,  1917,  the  amount  of 
bread  served  was  to  be  not  more  than  half  the  as- 
signed ration.  The  consumption  of  cold  meats,  or 
indeed,  of  meat  in  any  form  as  a  preliminary  course, 
was  prohibited.^ 

The  substance  of  all  these  measures,  therefore,  is 
that  commodities  of  vital  importance  for  the  national 
welfare  are  brought  under  close  regulation.  This,  of 
course,  includes  food  products,  essential  raw  mate- 
rials, and  leading  manufactured  goods.  Systems  of 
preference  and  of  standardization  are  adopted  as 
war  measures,  and  in  important  instances,  both 
household  and  industrial  consumers  are  rationed. 
The  committees  frequently  number  among  their 
members  not  only  civilian  and  military  authorities, 
but  representatives  of  the  industries.  In  any 
event,  control  is  administered  under  authority  of  the 
state. 

The  war  measures  of  England,  France,  and  Ger- 
many have  included  in  every  instance  a  thorough 
regulation  of  the  consumption  of  food  products. 
All  of  these  countries  are  largely  dependent  on  the 
outside  world  for  the  leading  cereals,  and  for  a  con- 
siderable part  of  their  supply  of  meat,  to  say  noth- 
ing of  their  dependence  on   the  tropical  and  sub- 

1  O.  B.,  Dec.  31,  1917,  p.  9. 


192        PROBLEMS  OF  RECONSTRUCTION 

tropical  regions  for  sugar,  coffee,  and  a  number  of 
kinds  of  raw  materials  for  the  manufacture  of  oils. 
In  view  of  the  impending  shortage,  these  countries 
were  driven  promptly  to  conservation  measures. 
The  decrees,  which  are  constantly  undergoing  re- 
vision to  suit  new  conditions,  contain  an  endless 
variety  of  regulations.  Usually,  control  becomes 
more  exacting,  so  that  the  tendencies  are  away  from 
voluntary  measures  originally  contemplated,  and  in 
the  direction  of  compulsion  in  various  forms. 

The  English  food  policy,  according  to  Lord 
Rhondda,  the  Food  Controller,  contains  the  follow- 
ing principles:  "My  aim,"  said  the  controller,  *'is 
to  safeguard  the  interests  of  the  consumer,  to  do 
away  with  profiteering  altogether,  and  to  prevent 
excessive  profits  of  any  kind.  The  framework  of 
our  machinery  is  formed  on  the  civil  service.  They 
are  the  administrators,  but  in  all  cases  we  secure 
the  best  available  business  men  to  advise  them,  as 
well  as  a  number  of  expert  committees  dealing  with 
almost  every  food  commodity.  The  policy  is  to 
limit  the  profits  at  every  step  from  the  producer  to 
the  consumer,  and  at  the  same  time  to  regulate  the 
supply."  ^ 

Some  of  the  purposes  outlined  above  are  accom- 
plished through  a  costing  department  which  ascer- 
tains the  profits  of  manufacturers  and  retailers  of 
foods.     For    the    purposes    of    administration,    the 

1  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta..  Dec.  1917,  p.  101.  For  a  study  of 
the  development  of  British  food  control  see  Howard  L.  Gray,  "War 
Time  Control  of  Industry,"  Chap.  VIII  passim. 


WAR  CONTROL  IN   FOREIGN   COUNTRIES     193 

country  is  divided  into  separate  areas,  and  for  each 
of  these  a  leading  firm  of  accountants  has  been  ap- 
pointed. Reasonable  profits,  based  on  pre-war  rates, 
are  added  to  the  present  cost,  and  price  limits  ar- 
ranged on  this  basis,  after  a  consultation  with  the 
trades  concerned.  Great  Britain  is  divided  into  six- 
teen food  divisions,  consisting  of  as  many  counties. 
Each  division  is  under  the  jurisdiction  of  a  com- 
missioner appointed  by  the  food  controller.  Again, 
in  each  division,  the  borough,  or  the  urban  or  rural 
councils,  or  other  local  authorities,  appoint  local 
food  committees  with  limited  powers  to  carry  out 
the  price  and  distribution  regulations  promulgated 
from  headquarters.^ 

Meanwhile,  tradesmen  are  registered  with  their 
local  committees ;  if  a  merchant  fails  to  observe  the 
regulations  he  is  struck  off  the  list,  which  means 
that  he  is  prevented  from  further  trading.  Orders 
fixing  and  amending  prices  are  communicated  to 
local  committees ;  the  trades  and  the  public  are 
informed  through  the  daily  press.  The  work  of 
inspection  is  performed  by  men  sent  out  from  head- 
quarters. Penalties  for  violations  of  the  regula- 
tions include  a  fine  not  to  exceed  £100,  or  imprison- 
ment not  to  exceed  six  months  with  or  without 
hard  labor,  or  both  fine  and  imprisonment.^  Lord 
Rhondda  has  explained  that  "while  the  prices  of 
practically  all  essential  foods  are  now  under  control 

1  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  Dec.  1917,  p.  101 ;  Com.  Rept.,  May 
1,  1917,  pp.  407  ff. 

»  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  Dec.  1917,  p.  101. 
O 


194        PROBLEMS  OF  RECONSTRUCTION 

no  compulsory  rationing  is  imposed  on  the  general 
public,  although  all  public  eating  places  are  rationed 
as  to  the  amount  of  meat,  flour,  bread,  and  sugar 
which  may  be  used  every  week  on  the  basis  of  an 
average  for  each  meal."  ^  He  announced  that  after 
December  30,  1917,  only  half  a  pound  of  sugar 
per  capita  a  week  would  be  permitted.  This 
amount  is  to  be  obtained  by  means  of  a  system  by 
which  each  consuming  householder,  or  each  con- 
sumer, registers  with  a  specified  retailer  and  secures 
from  the  local  food  committee  a  card  entitling  him 
to  his  ration.  The  retailer  is  required  to  keep  a 
record  of  deliveries  to  prevent  consumers  from  ob- 
taining more  than  their  share. 

In  addition  to  regulations  affecting  household 
consumers,  a  system  of  control  has  been  inaugurated 
applying  to  manufacturers  of  food  products.  With 
reference  to  wheat  products,  "flour  made  from 
wheat  must  be  straight-run  flour,  milled  to  81  per 
cent  extraction,  and  it  is  compulsory  to  mix  in 
twenty  per  cent  of  flour  from  other  cereals  and  pulse, 
and  it  is  permissible  to  mix  in  up  to  fifty  per  cent, 
while  no  bread  may  be  sold  unless  twelve  hours 
old."  ^  The  amount  of  sugar  used  by  manufac- 
turers is  also  limited.  As  a  rule,  the  use  of  foodstuffs 
for  industrial  purposes  and  for  feeding  animals  is 
prohibited.  Besides  these  regulations,  appeals  are 
made  to  the  public  to  economize.  An  interesting 
feature  of  British  food  regulation  was  the  reduction 
in  the  price  of  the  quartern  loaf,  which  was  made 

1  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  Dec.  1917,  p.  101.  « Ibid. 


WAR  CONTROL  IN   FOREIGN   COUNTRIES    195 

possible  through  the  subsidizing  of  flour. ^  As  with 
American  regulations,  great  care  is  taken  to  pre- 
vent price  control  from  discouraging  production. 
The  reader  may  observe  from  this  discussion  that 
British  regulations  have  many  points  in  common 
with  our  own.  Indeed,  many  of  our  lessons  were 
learned  from  that  country. 

The  German  food  situation  presented  many  serious 
problems.  Largely  isolated  from  the  principal  food- 
producing  countries,  she  was  put  to  many  shifts  to 
make  her  own  resources  produce  the  required  supply. 
The  government  took  the  matter  of  food  control  in 
hand  almost  from  the  start.  Simultaneously  with 
the  declaration  of  war,  the  military  authorities  in 
the  respective  districts  established  maximum  retail 
prices  for  the  principal  food  products.^  Shortly,  in 
many  of  the  cities,  ordinances  of  a  similar  purport 
were  passed.  This  step  was  necessary  in  view  of 
the  rapid  depletion  of  stocks,  and  the  disposition  to 
hoard  with  its  attending  evils.  Among  the  first 
measures  in  Germany  was  a  law  fixing  maximum 
prices,  including  the  authority  to  confiscate  food 
products  if  dealers  refused  to  sell  at  the  stipulated 
prices.     Maximum  wholesale  prices  per  metric  ton 

1  Mo.  Rev.  U.  S.  Lab.  Sta.,  Dec.  1917,  pp.  100-101 ;  for  further  dis- 
cussion see  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  July  1917,  pp.  69-78;  ibid., 
Nov.  1917,  pp.  91-104;  Com.  Rept.,  Dec.  7,  1916,  p.  897;  Dec.  13,  1916, 
p.  977;  Jan.  11,  1917,  p.  129;  Nov.  22,  1917,  p.  721;  Bus.  Dig.,  Dec. 
12,  1917,  p.  486;  Feb.  6,  1918,  p.  18;  Economic  World,  Dec.  22,  1917, 
p.  819;  Com.  and  Fin.  Chron.,  May  5,  1917,  p.  1758;  Sept.  8,  1917, 
p.  967;  Oct.  6,  1917,  p.  1366;   Howard  L.  Gray,  op.  ciL 

«  Com.  Rept.,  Jan.  16,  1915,  p.  230. 


196        PROBLEIMS   OF  RECONSTRUCTION 

for  cereals  sold  in  Berlin  were  fixed  by  an  act  of 
October  28,  1914.^  About  the  same  time  a  number 
of  conservation  laws  were  enacted ;  one  of  these  pro- 
vided that  flour  used  in  the  baking  of  bread  should 
be  mixed  with  a  certain  per  cent  of  rye  substitute, 
and  in  the  case  of  rye  bread,  from  five  to  twenty 
per  cent  of  potato  flour  was  to  be  substituted. 
Meanwhile,  the  production  of  certain  other  bakery 
products  was  put  under  regulation.^  As  early  as 
January  28,  1915,  the  American  vice-consul  at 
Berlin  reported  that  the  government  was  employ- 
ing every  possible  means  to  regulate  the  use  and 
to  conserve  the  supply  of  foodstuffs ;  among  other 
measures,  advertisements  were  placed  in  street  cars 
and  on  bill  boards  urging  the  people  to  be  sparing.' 
By  a  law  of  February  1,  1915,  authority  was  given 
to  seize  for  public  use  all  grain  and  flour  in  the  empire 
through  the  newly  created  war  grain  company.  Ac- 
cording to  the  plan,  this  organization  was  to  dis- 
tribute supplies  to  communities  in  proportion  to 
population,  and  the  communities,  in  turn,  were  to 
arrange  for  distribution  to  companies  and  private 
individuals.  This  program,  of  course,  involved  mills 
and  bakeries  in  the  meshes  of  control.^  About  the 
same  time,  it  was  decided  to  apportion  the  bread 
supply  by  means  of  cards.  Berlin,  for  example, 
was  to  be  divided  into  some  170  districts.  Bread 
cards  were  not  transferable;  they  were  good  for 
only  one  week,   and  penalties  were  prescribed  for 

1  Com.  Rept.,  Jan.  16,  1915,  p.  230. 

«  Ibid.  3  75f(/,,  March  3,  1915,  p.  869.  *  Ibid. 


WAR  CONTROL  IN   FOREIGN   COUNTRIES     197 

their  misuse.^  Following  these  early  measures,  the 
country  has  gone  more  and  more  to  the  rationing 
system.  According  to  the  plan  which  prevailed 
during  the  latter  part  of  1917,  food  rations  were 
generally  fixed  for  the  whole  empire  by  the  Imperial 
War  Food  Bureau,  although  in  practice  the  rations 
apportioned  to  the  civilian  population  varied  greatly 
from  locality  to  locality  and  were  usually  dependent 
on  the  local  food  supply.^ 

The  growing  food  shortage  forced  other  conserva- 
tion measures  on  the  country.  The  war  kitchen  as 
an  instrument  of  war  economy  is  now  well  known 
both  in  Germany  and  in  England.  While  other 
purposes  were  involved  in  their  establishment,  such 
as  the  saving  of  fuel,  labor,  and  the  by-products  of 
cooking,  they  were  adopted  chiefly  because  of  their 
prospective  economies  in  the  distribution  of  food. 
They  were  of  notable  value  in  the  provisioning  of 
the  poorer  portions  of  the  population.  A  person 
who  obtained  supplies  from  a  war  kitchen  was  re- 
quired to  surrender  tickets  to  cover  the  kind  and 
amount  of  food  delivered  to  him.  The  rules  on  the 
ticket  indicated  the  conditions  under  which  the 
holder  was  entitled  to  receive  food.^ 

Numerous  trying  problems  have  arisen  in  con- 
nection with  the  administration  of  the  food  pro- 
gram. It  has  been  next  to  impossible  to  make 
a  satisfactory  distribution  of  the  limited  supply 
among  military,  industrial,  and  agricultural  classes ; 

1  Com.  Kept.,  March  9,  1915,  p.  976. 

2  Mo.  Rev.  Bu.  Lab.  Sta.,  Jan.  1918,  pp.  91  ff.  » Ibid. 


198        PROBLEMS  OF  RECONSTRUCTION 

the  problem  of  stimulating  the  supply  while  restrict- 
ing the  price  has  not  been  solved ;  it  has  been  im- 
possible to  devise  any  kind  of  regulation  which  would 
compel  the  agricultural  classes  to  bear  their  share  of 
the  burdens  involved  in  food  control.  Meanwhile, 
the  shortage  of  feed  raised  problems  as  to  the  dis- 
position of  livestock ;  slaughtering  on  a  considerable 
scale  would  promptly  curtail  the  supply  of  milk  and 
fats  as  well  as  meat,  and  would  otherwise  affect 
the  food  problem.  The  following  quotation  reveals 
an  unexpected  method  of  evading  the  regulations : 
*' People  now  go  out,"  said  a  report,  "not  merely  to 
buy  but  to  steal  food  and  to  take  it  forcibly ;  they 
have  the  effrontery  to  help  themselves  to  standing 
field  and  garden  crops,  often  long  before  these  are 
ripe.  The  injury  to  the  farmers  and  to  our  future 
supply  is  obvious."  ^ 

Recently,  there  has  been  some  discussion  of  grad- 
ing food  prices  on  the  basis  of  income.  This  plan, 
however,  was  abandoned  because  it  raised  more 
problems  than  it  solved.  It  was  clearly  recog- 
nized that  the  incomes  and  status  of  a  considerable 
part  of  the  population  are  constantly  changing, 
and  that  no  price  arrangement  which  attempted  to 
adjust  the  payment  for  commodities  to  the  scale  of 
income  could  be  effected  with  any  show  of  justice.^ 

1  Mo.  Rev.  U.  S.  Bii.  Lab.  Stca.,  Jan.  1918,  pp.  Ql'S.,  cf.,  also,  the 
Review  for  July  1917,  pp.  66-69;  Dec.  1917,  pp.  99-101;  Jan.  1918, 
pp.  91-95. 

'  Ibid.,  p.  9t ;  for  a  summary  comparison  of  English,  German,  and 
American  methods  of  food  control  see  Bus.  Dig.,  Nov.  21,  1917,  p.  359; 
O.  B.,  Sept.  24,  1917,  p.  5 ;  Mo.  Rev.  Bu.  Lab.  Sta.,  Dec.  1917,  p.  100. 


WAR  CONTROL  IN  FOREIGN  COUNTRIES     199 

As  with  other  belligerents,  war  control  in  Ger- 
many comprehends  price  and  profit  regulation,  con- 
trol of  the  flow  of  raw  materials  to  the  industries, 
and  machinery  for  the  adjustment  of  disputes  be- 
tween laborers  and  employers.  Shortly  after  the 
outbreak  of  the  war,  the  German  Federal  Council 
issued  an  order  effective  December  14,  1914,  estab- 
lishing maximum  prices  for  copper,  scrap  brass, 
scrap  bronze,  aluminum,  nickel,  antimony,  tin,  and 
zinc ;  and  iron  and  steel  were  shortly  added  to  the 
list.^  Later  regulations  brought  all  important  mate- 
rials under  price  regulation.  The  war  policy  of  course 
includes  the  requisitioning  of  important  materials 
for  government  use.  Other  measures  include  the 
closing  of  non-essential  establishments  and  the 
transfer  of  their  industrial  energies  to  the  produc- 
tion of  war  materials ;  meanwhile,  plants  are  com- 
bined under  central  management  and  raw  materials 
are  allocated  under  government  direction  to  the  dif- 
ferent factories.  Indeed,  much  of  the  war  organi- 
zation in  Germany  is  probably  designed  partly  as  a 
reconstruction  measure  in  order  to  put  the  country 
in  a  position  to  resume  promptly  its  former  peace 
activities.  A  feature  of  post-war  industrial  organ- 
ization will  be,  therefore,  extensive  state  control 
over  some  of  the  most  important  economic  activities.^ 

In  the  case  of  England,  war  control  comprehends 

»  Com.  Rept.,  Jan.  16,  1915,  p.  232. 

2  Ibid.,  May  16,  1917,  p.  611 ;  Oct.  25,  1917,  p.  346;  Jan.  9,  1918,  p. 
100;  March  22,  1918,  p.  1101 ;  April  18,  1918,  p.  251 ;  June  20,  1918,  p. 
1226;   July  16,  1918,  p.  205. 


200        PROBLEMS  OF  RECONSTRUCTION 

the  requisition  of  a  number  of  products  and  their 
allotment  to  establishments  for  use  in  prescribed 
ways,  government  purchase  and  distribution  of  a 
number  of  commodities,  such  as  cotton,  wool,  and 
leather,  the  control  of  capital  issues,  mobilization  of 
securities  for  the  national  use,  and  regulation  of 
exchange  transactions.^  Immediately  after  the  out- 
break of  the  war  the  government  assumed  control 
of  the  railroads  and  subsequently  took  charge  of 
coal  mines. ^  In  short,  as  in  other  countries,  con- 
trol has  been  extended  to  almost  every  enterprise  of 
national  importance. 

In  meeting  the  labor  situation  governments  every- 
where have  been  compelled  to  intervene  in  the  re- 
lations between  employers  and  workmen,  both  for 
the  purpose  of  maintaining  industrial  peace  and  for 
securing  the  largest  possible  productivity  from  in- 
dustry. With  millions  of  men  in  military  service, 
labor  for  industrial  purposes  has  become  one  of  the 
scarce  factors  of  production ;  hence  the  need  of  en- 
couraging every  man  to  work  as  hard  as  possible. 
In  England,  the  solution  of  such  problems  presented 
peculiar  difficulties.  Not  only  is  unionization  more 
complete  than  in  other  countries,  but  the  trades 
have  become  enmeshed  in  traditions  which  are 
directly  opposed  to  maximum  effort  on  the  part  of 

^  For  references  to  these  measures  see  Com.  Rept.,  May  26,  1916, 
p.  755;  June  20,  1916,  p.  1073;  June  29,  1916,  p.  1201;  Dec.  8,  1916, 
p.  913;  Dec.  18,  1916,  p.  1053;  July  3,  1917,  p.  24;  Sept.  29,  1917,  p. 
1202;  Jan.  30,  1917,  p.  385;  Feb.  2,  1917,  p.  433;  July  22,  1918,  p.  1 
(Supplement);   July  24,  1918,  p.  306;    Aug.  2,  1918,  p.  433. 

*  Howard,  ojp.  cit.,  pp.  1  and  2,  and  61  ff. 


WAR  CONTROL  IN   FOREIGN   COUNTRIES    201 

workmen.  These  customs  were  related  not  only  to 
questions  of  wages  and  hours  of  work,  but  com- 
prehended minute  regulations  of  all  the  relations 
that  workmen  believe  are  significant  for  their  wel- 
fare ;  but  one  of  the  most  difficult  of  all  to  localize 
and  combat  was  the  issue  as  to  "  what  amount  of  out- 
put by  different  employees  should  be  considered  a 
fair  day's  work,  not  to  be  considerably  exceeded."  ^ 
With  the  advent  of  the  war,  with  its  tremendous 
demands  upon  human  energy,  the  policy  of  "going 
easy"  had  to  be  suspended.  This  was  one  of  the 
first  war  labor  problems  to  be  attacked  in  England. 
The  Treasury  agreement  of  March  1915  was  to  the 
effect  that  "the  trade  unions  were  of  the  opinion 
that  during  the  war  period  the  relaxation  of  the 
present  trade  practices  was  imperative,  and  that 
each  union  should  be  recommended  to  take  into 
favorable  consideration  such  changes  in  working 
conditions  or  trade  customs  as  might  be  necessary, 
with  the  view  of  increasing  the  output  of  munitions 
or  of  war  equipment."  The  unions  made  this 
concession  on  the  conditions  that  any  departure 
from  their  established  rules  was  only  for  the  period 
of  the  war,  that  all  workmen  who  had  joined  the 
colors  should  have  priority  of  employment  after  the 
war,  that  the  rate  paid  to  substituted  laborers  should 
be  the  same  as  would  normally  be  paid  to  workmen 
engaged  in  similar  work,  that  a  record  should  be 
kept  of  changes  from  the  pre-war  conditions,  and 

1  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  June  1917,  p.  823;  Bulletin  No.  237, 
U.  S.  Bu.  Lab.  Sta.,  pp.  105  ff. 


202        PROBLEMS  OF  RECONSTRUCTION 

finally,  that  before  any  change  was  inaugurated 
during  the  war  the  workmen  concerned  should  be 
given  notice  and  should  be  afforded  an  opportunity 
for  conference  among  their  fellows.^ 

The  Munitions  of  War  Act  of  July  2,  1915, 
amended  January  27,  1916,  and  August  21,  1917, 
provided  much  of  the  machinery  for  labor  regulation 
during  the  war.  The  provision  designed  to  pre- 
vent the  migration  of  labor  from  occupation  to  oc- 
cupation is  contained  in  section  7  of  the  original 
act.  Workmen  in  munitions  plants,  or  in  other  es- 
sential industries,  were  required  to  obtain  a  leaving 
certificate  on  giving  up  their  job.^  Employers  were 
prohibited  from  accepting  men  without  certificates, 
if  the  men  had  been  employed  within  the  past  six 
weeks,  or  for  any  other  time  indicated  by  the  Min- 
ister of  Munitions,  in  munitions  works  or  other 
essential  industries.  In  the  event  that  workmen 
thought  that  employers  unfairly  refused  to  grant 
certificates,  the  issue  was  to  be  taken  to  a  munitions 
tribunal,  and  either  workmen  or  their  representa- 
tives were  permitted  to  present  the  complaint. 
Amendment  to  the  original  act  shortly  became 
necessary.  It  was  difficult  to  interpret  a  number  of 
ambiguous  terms ;  moreover,  many  skilled  work- 
men found  that  the  provisions  of  the  law  prevented 
them  from  improving  their  condition  by  seeking 
positions  elsewhere  as  skilled  workmen,  as  foremen, 
or  as  instructors  for  the  new    industrial    recruits. 

»  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  June  1917.  p.  823. 

«  Ibid.,  of.  also  issues  of  Sept.  1917,  p.  127,  and  Nov.  1917,  p.  63. 


WAR  CONTROL  IN   FOREIGN   COUNTRIES     203 

Indeed,  many  curious  anomalies  developed  as  a  re- 
sult of  the  operation  of  the  law ;  it  not  infrequently 
happened  that  former  unskilled  workmen  were  able 
to  earn  higher  wages  than  skilled  workmen  engaged 
under  the  terms  of  the  Munitions  Act.  The  amend- 
ments were  designed  to  correct  these  difficulties. 
But,  even  with  the  changes,  the  act  failed  to  give 
satisfaction.^  The  report  of  the  Commission  of 
Inquiry  into  Industrial  Unrest,  published  about 
August  1917,  urged  that  the  operation  of  the  act 
was  undoubtedly  a  serious  cause  of  unrest.  A  par- 
ticular grievance  was  the  section  which  restricted  the 
workmen's  freedom  of  movement.  The  Commission 
advised  that  if  the  leaving  certificate  restrictions 
were  abolished  one  of  the  chief  causes  of  dissatisfac- 
tion would  be  removed.^  The  certificate  feature  was 
eliminated  by  an  order  effective  October  15,  1917. 
Thereafter,  any  workman  engaged  in  the  manufac- 
ture of  munitions  was  free  to  leave  his  position  on 
giving  his  employer  a  week's  notice,  or  such  other 
notice  as  was  provided  in  the  employment  contract.^ 
Under  British  war  regulations,  the  government 
may  use  a  certain  amount  of  compulsion  in  dealing 
with  strikes.  The  Munitions  Act,  referred  to  above, 
makes  strikes  and  lockouts  illegal  and  provides  for 
compulsory  arbitration.  Another  source  of  power  is 
the  Defense  of  the  Realm  regulations  which  make 
** incitement  to  strike,  or  rather  an  attempt  to  in- 

1  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  June  1917,  pp.  821-822;  Nov.  1917, 
p.  63;  Dec.  1917,  p.  57.  , 

.« Ibid.,  Oct.  1917,  p.  35.  3  Ibid.,  Dec.  1917,  p.  68. 


204        PROBLEMS  OF  RECONSTRUCTION 

terfere  with  the  output  of  munitions  of  war,  a 
serious  misdemeanor,  punishable  with  very  heavy 
penalty."  ^  In  order  to'prevent  undue  delays  in  the 
settlement  of  grievances,  the  Minister  of  Munitions 
is  empowered  by  the  Munitions  Act  to  prescribe 
the  time  within  which  any  dispute  is  to  be  reported. 
Tribunals  are  directed  to  make  their  award  without 
delay,  —  if  possible,  within  fourteen  days  after  the 
case  is  presented.  If  the  Minister  of  Munitions  is 
satisfied  that  the  award  is  binding  on  the  majority  of 
employers  in  a  given  industry,  he  may  direct  that 
the  award  shall  be  binding  on  any  or  all  employers, 
or  persons,  in  the  industry,  either  without  modi- 
fication, or  subject  to  such  changes  as  he  may  deem 
necessary.  No  workman  engaged  in  the  manu- 
facture of  munitions  may  be  discharged  on  the 
ground  that  he  is  a  member  of  a  trade  union. ^ 

The  effectiveness  of  the  compulsory  features  of 
the  Munitions  Act  has  been  called  into  question. 
It  has  been  urged,  for  example,  that  "so  far  as  the 
first  of  these  powers  is  concerned  {i.e.,  compulsory 
arbitration),  it  would  appear  that  the  existence  of 
the  powers  has  in  a  large  number  of  cases  prevented 
minor  strikes  from  occurring.  It  is,  of  course,  a 
truism  to  say  that  without  the  patriotic  feeling  of 
the  workmen  the  act  would  have  had  no  effect,  but 
it  is  obvious  that  the  act  was  possible  only  because 
it  did  represent  something  of  the  feelings  of  the 

1  Mo.  Rev.  Bu.  Lab.  Sta.,  June  1917,  p.  821 ;  Howard,  op.  cit.,  p.  52; 
Bus.  Dig.,  Oct.  10,  1917,  p.  71. 

2  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  Nov.  1917,  p.  63. 


WAR  CONTROL  IN   FOREIGN   COUNTRIES     205 

people.  Apparently  the  Munitions  Act  was  passed 
because  the  country  was  ready  for  the  Munitions 
Act,  and  was  prepared  to  accept  the  principles 
which  it  laid  down."  ^ 

The  machinery  for  shifting  men  from  the  less 
essential  to  the  war  industries  was  provided  by  the 
Department  of  National  Service.  In  substance,  the 
director-general  of  this  service  undertook  to  form  a 
pool  of  male  labor  to  be  used  both  to  replace  men 
who  were  withdrawn  from  the  munitions  and  other 
important  industries  for  military  service,  and  to 
supply  men  from  other  sources  to  the  war  industries.^ 
To  accomplish  the  latter  purpose  two  lists  were 
provided,  one  of  "restricted  occupations,"  and  the 
other  of  "trades  and  occupations  of  primary  im- 
portance." '  Laborers  from  the  first  group  were  to 
supply  as  far  as  possible  the  growing  needs  of  the 
second.  The  plan  also  provided  that,  in  place  of 
a  general  appeal  for  volunteers  for  service  in  any 
work  they  might  be  assigned  to,  there  should  be  a 
direct  and  special  appeal  to  the  various  trades  to 
administer  the  program  of  substitution  through 
joint  committees  of  employers  and  workmen  in  each 
organized  trade.  If  the  trade  was  not  well  or- 
ganized, the  work  was  to  be  performed  by  local 
national  service  committees.  The  "substitution 
volunteers"  were  to  be  allocated  to  the  important 
industries  by  the  substitution  officers  of  the  national 
service.     Rules  were  established  covering  the  trans- 

1  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  June  1917,  p.  821. 

«  Ibid.,  p.  835.  «  Ibid.,  pp.  835  ff. 


206        PROBLEMS  OF  RECONSTRUCTION 

fer  of  men  from  occupation  to  occupation,  wages, 
allowances  for  subsistence  and  travel,  and  for  out- 
of-work  allowances.^ 

In  Germany,  the  war  labor  legislation  is  con- 
tained in  the  Auxiliary  Service  Act  and  in  supple- 
mentary orders  and  regulations.^  One  of  the  pur- 
poses of  these  measures  was  to  mobilize  civil  labor 
for  war  production.  The  law  places  great  restric- 
tions on  the  movement  of  laborers  and  gives  the 
military  authorities  large  control  over  the  whole 
labor  situation.  Every  male  German  citizen  be- 
tween the  ages  of  seventeen  and  sixty,  who  is  not 
in  service  with  the  armed  forces,  is  subject  to  the 
national  auxiliary  service  for  the  period  of  the  war. 
This  service  includes  employment  by  public  au- 
thorities, in  public  institutions  or  establishments, 
in  war  industries,  in  agriculture  and  forestry,  in 
nursing  the  sick,  and  in  war  organizations  of  all 
kinds.  It  was  left  to  the  War  Office,  in  cooperation 
with  imperial  or  state  authorities,  to  decide  to  what 
extent  the  number  of  persons  employed  by  public 
authority  was  excessive.  Boards  created  for  the 
district  of  each  general  command,  or  for  parts  of 
such  districts,  have  power  to  decide  whether  the 
occupation  is  important  and  to  what  extent  the 
number  of  laborers  employed  exceeds  the  current 
needs.  These  boards  are  composed  of  a  military 
officer  as  chairman,  two  higher  state  officials,  — 
one  of  whom  is  from  the  factory  inspection  service, 

1  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  July  1917,  pp.  25  ff. 

2  Ibid.,  April  1918,  pp.  89  ff. 


WAR  CONTROL  IN  FOREIGN  COUNTRIES    207 

—  and  two  employers'  and  two  workmen's  repre- 
sentatives. A  Board  of  Appeals  is  created  in  the 
War  Office,  likewise  constituted  of  representatives 
of  civil  and  military  authorities  and  of  representa- 
tives of  employers  and  workmen.  Persons  subject 
to  auxiliary  service  may  be  requisitioned  for  the 
national  auxiliary  service.  As  a  rule,  the  requisi- 
tions operate  first  through  a  request  for  volun- 
teers, but  failing  this,  persons  may  be  called  by  a 
special  summons  in  writing.  According  to  the  law, 
no  one  can  give  employment  to  a  person  subject  to 
auxiliary  service,  who  has  been  employed  during 
the  past  two  weeks  in  any  essential  occupation,  un- 
less such  employee  shows  a  leaving  certificate  indi- 
cating that  he  left  the  position  with  the  consent  of 
his  employer.  In  the  event  the  employer  refuses  to 
grant  the  certificate,  the  workman  may  appeal  his 
case  to  designated  authorities.  The  laws  provide 
for  permanent  workmen's  committees,  whose  func- 
tions are  to  promote  good  will  among  the  men  and 
between  employers  and  workmen.  These  com- 
mittees are  also  charged  with  the  duty  of  bringing 
to  the  attention  of  employers  proposals,  wishes,  and 
complaints  of  workmen.  The  plan  calls  for  ar- 
bitration and  for  the  enforcement  of  the  awards. 
Persons  who  do  not  comply  with  the  orders  assign- 
ing them  to  an  occupation,  and  employers  who  ac- 
cept workmen  in  contravention  of  the  law,  are  sub- 
ject to  heavy  penalties.^ 

The  French  measures  for  the  prevention  of  in- 

»  Mo.  Rev.  Bu.  Lab.  Sta.,  April  1918,  pp.  89  fE. 


208        PROBLEMS  OF  RECONSTRUCTION 

dustrial  disputes  are  contained  in  a  decree  of  the 
Minister  of  War  dated  September  17,  1917.^  Pro- 
vision is  made  for  permanent  committees  of  arbitra- 
tion and  conciliation,  composed  of  an  equal  number 
of  representatives  of  employers  and  workmen.  If 
the  committee  fails  to  reach  a  decision,  an  umpire 
is  chosen ;  should  the  committee  fail  to  agree  on 
the  selection  of  an  umpire,  the  Minister  of  War  is 
to  make  the  choice.  Workmen  may  be  placed  under 
requisition,  or  employers'  establishments  may  be 
requisitioned,  as  the  case  may  be,  if  the  award  is 
not  accepted.^ 

In  a  former  chapter  we  discussed  at  some  length  the 
American  war  time  foreign  commercial  policy.  We 
may  refer  briefly  to  similar  measures  abroad.  The 
principal  considerations  in  establishing  control  are 
the  shortage  of  tonnage,  the  necessity  of  giving 
priority  to  shipments  of  food  and  important  raw 
materials  for  manufactures,  the  enforcement  of 
economy  in  personal  expenditures,  and  the  need  of 
speeding  up  the  war  industries.^  Control,  as  in  the 
United  States,  covers  both  imports  and  exports. 
In  England,  the  authority  for  the  restriction  of 
imports  is  contained  in  the  Customs  Consolidation 
Act  of  1876,  which  provides  that  "the  importation 
of  arms,  ammunition,  gunpowder,  or  any  other 
goods  may  be  prohibited  by  proclamation  or  by 
Order    in    Council."  ^     War    control    over    imports 

1  Mo.  Rev.  Bu.  Lab.  Sta.,  Jan.  1918,  pp.  73-74. 

2  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  Jan.  1918,  pp.  73-75. 

'  Tariff  Series  No.  39,  p.  3  (U.  S.  Department  of  Commerce  Pub.). 
*  Ibid. 


WAR  CONTROL  IN  FOREIGN   COUNTRIES     209 

was  inaugurated  September  30,  1914,  when  restric- 
tions were  imposed  on  commerce  in  sugar.  The 
regulations  have  been  extended  from  time  to  time, 
until  at  present  they  cover  hundreds  of  materials 
entering  into  the  commerce  of  the  country.^  In 
April  1916,  the  Board  of  Trade  organized  the  De- 
partment of  Import  Restrictions  to  administer  the 
licensing  system  as  applied  to  imports. 

War  control  has  occasioned  great  hardships  to 
many  British  industries  which  were  dependent  on 
outside  sources  for  raw  materials.  Some  ameliora- 
tion of  the  rigors  of  the  system  has  been  obtained, 
however,  by  rationing  of  industries,  which  affords 
each  establishment  an  opportunity  to  obtain  a  por- 
tion of  the  limited  supply.  By  this  system,  the 
amount  of  the  commodity  imported  in  a  particular 
year,  or  in  a  given  period,  is  taken  as  the  standard 
for  calculations.  Regular  importers  may  receive  a 
license  to  obtain  a  given  percentage  of  their  pur- 
chases for  that  time.  "A  simple  plan  for  rationing 
is  occasionally  carried  out  through  a  representative 
trade  committee,  which  receives  notice  of  the 
amount  of  goods  allotted  to  the  trade  and  attends  to 
the  distribution  among  manufacturers  or  dealers."  ^ 

The  earliest  export  measures  were  adopted  under 

^  Tariff  Series,  No.  39,  op.  cit.,  pp.  6-10;  Daily  Consular  and  Trade 
Rept.,  Nov.  30,  1914,  p.  950;  Com.  Kept.,  Feb.  17,  1916,  p.  658;  Feb. 
19,  1916,  p.  689;  March  11,  1916,  p.  978;  March  24, 1916,  p.  1169;  June 
5,  1916,  p.  865;  Dec.  7,  1916,  p.  897;  Dec.  8,  1916,  p.  915;  Dec.  18, 
1916,  p.  1041;  Dec.  22,  1916,  p.  1105;  Jan.  8,  1917,  p.  81;  Bus.  Dig., 
March  27,  1918,  p.  414;  O.  B.,  July  6,  1917,  p.  7. 

*  Tariff  Series,  No.  39,  op.  cit.,  p.  4. 
P 


210        PROBLEMS  OF  RECONSTRUCTION 

the  authority  of  section  8  of  the  Customs  and  In- 
land Revenue  Act  of  1879,  and  the  Exportation  of 
Arms  Act  of  1900.  An  enactment  of  1914  provided 
that  royal  proclamations  "may  be  varied  or  added 
to  by  an  order  made  by  the  Lords  of  the  Council 
on  the  recommendation  of  the  Board  of  Trade."  ^ 
As  in  the  case  of  imports,  the  lists  have  been  ex- 
tended from  time  to  time,  until  a  great  variety  of 
commodities  is  brought  within  the  scope  of  regula- 
tion.2  Recently,  such  goods  have  been  grouped 
into  three  classes,  namely,  Class  A,  covering  ex- 
ports "to  all  destinations,"  Class  B,  "to  all  ports 
and  destinations  abroad  other  than  ports  and  des- 
tinations in  British  possessions  and  protectorates," 
and  Class  C,  "to  all  destinations  in  European  and 
Asiatic  Russia  and  in  other  foreign  countries  in 
Europe  and  on  the  Mediterranean  Sea,  other  than 
France  and  French  possessions,  Italy  and  Italian 
possessions,  Spain  and  Portugal,  and  to  all  ports  in 
such  foreign  countries."  ^ 

In  order  to  prevent  commodities  from  reaching 
the  enemy.  Great  Britain  also  makes  special  arrange- 
ments with  the  neutrals.  England  also  cooperates 
with  her  associates  in  the  war  in  enforcing  foreign 
trade  regulations.  By  agreement  with  France,  for 
example,  "a  British  office  in  Paris  grants  licenses 
for  shipments  of  French  goods  to  the  United  King- 

1  Tariff  Series,  No.  39,  op.  cit,  p.  10. 

^Ibid.,  pp.  13-32;  Daily  Consular  and  Trade  Rept.,  Oct.  14,  1914, 
p.  242;  Com.  Rept.,  Feb.  15,  1915,  p.  633;  Jan.  8,  1916,  p.  106;  O.  B., 
Nov.  3,  1917,  p.  4;   Bus.  Dig.,  Jan.  16,  1918,  p.  102. 

»  Tariff  Series,  No.  39,  op.  cit.,  p.  13;  Com.  Rept.,  Jan.  19,  1917,  p.  1. 


WAR  CONTROL  IN  FOREIGN   COUNTRIES     211 

dom,  and  a  French  office  in  London  has  correspond- 
ing powers.  Not  all  goods  are  subject  to  this  un- 
limited privilege  of  admission ;  certain  articles  make 
up  a  list  of  reserved  goods  which  are  either  pro- 
hibited or  subject  to  a  percentage  limitation."  ^ 
Before  the  entrance  of  the  United  States  into  the 
war,  the  British  government  recognized  certain 
organizations  in  this  country,  such  as  the  Textile 
Alliance,  as  agencies  for  the  distribution  of  goods 
which  Great  Britain  permitted  to  be  exported  to 
this  country.  With  the  development  of  American 
control  such  arrangements  are  unnecessary,  because 
the  home  trade  organizations  operate  under  the  ad- 
ministration of  our  own  War  Trade  Board.^ 

France  also  regulates  imports  and  exports,  and 
controls  commerce  with  neutrals,  by  measures  sim- 
ilar to  those  of  the  United  States  and  Great  Britain.^ 
The  original  authority  for  such  control  is  found  in 
the  laws  of  August  22,  1791,  and  of  December  17, 
1814  ;  an  act  of  August  17,  1915,  amplifies  the  provi- 
sions of  these  old  laws  to  suit  the  new  conditions.^ 

Early  in  the  war,  Germany  adopted  the  policy  of 
prohibiting  the   export   of   commodities   needed   at 

1  Tarijff  Series,  No.  39,  oy.  cit.,  pp.  5,  11. 

nbid.;  Com.  Rept.,  Jan.  14,  1915,  p.  195;  July  10,  1915,  p.  153; 
O.  B.,  Dec.  15,  1917,  p.  3;  Feb.  18,  1918,  p.  2. 

'  Cf .  Marius  Dujardin,  La  Reglementation  des  Exportations  et  des 
Importations  pendant  la  Guerre,  pp.  65-105;  113-122;  139-142;  152 
S.;  R.  Pommereuil,  La  Guerre  Economique  (1914-1917),  pp.  210-280; 
see  Supplement  No.  1  (1917)  and  Supplement  No.  2  (1917)  by  the  same 
author;  see,  also,  Ponimereuil's  La  Guerre  Economique,  1914-1918, 
(ed.  1918),  which  brings  the  account  of  the  regulations  down  to  date. 

*  Pommereuil,  op.  cit.  (1917),  pp.  48,  49 ;  Dujardin,  op.  cit.,  pp.  10-21. 


212        PROBLEMS  OF  RECONSTRUCTION 

home.^  The  blockade,  to  a  large  extent,  makes  im- 
port and  export  control  unnecessary.  Still,  Ger- 
many has  trade  with  the  surrounding  neutrals,  and 
trade  with  these  countries  is  regulated  by  measures 
which  suggest  the  policy  of  England  and  the  United 
States.  The  foreign  trade  policy  of  Germany 
also  includes  agreements  with  neutrals  by  which 
she  obtains  desired  commodities  in  exchange  for 
important  goods  she  has  to  offer,  such  as  potash, 
coal,  dyes,  medicines,  and  limited  quantities  of 
iron  and  steel  and  machinery.' 

1  Com.  Rept.,  March  24,  1915,  p.  1192;   March  2,  1916,  p.  849. 
»  Cf.  WaU  St.  Jour.,  April  2, 1918. 


CHAPTER  VII 
ECONOMIC  RESULTS  OF  THE  WAR 

We  are  now  in  a  position  to  study  some  of  the 
leading  economic  results  of  the  war.  This  task  was 
impossible  until  we  had  learned  something  of  war 
measures  both  at  home  and  abroad,  because  indus- 
trial changes  since  the  war  began  are  largely  an  out- 
come of  our  efforts  to  prepare  for  the  conflict  and 
make  it  successful.  One  group  of  results,  therefore, 
is  the  direct  outcome  of  war  control.  But  there  are 
other  consequences  of  great  importance  not  imme- 
diately related  to  war  regulations.  Industry  every- 
where in  the  world  has  been  disturbed.  Our  study 
in  this  chapter,  therefore,  must  refer  to  two  groups 
of  results,  namely,  those  growing  out  of  war  policies, 
and  those  developing  from  other  causes.  Recon- 
struction, it  may  be  said,  is  necessary  because  the 
war  has  produced  abnormal  conditions.  An  un- 
usual situation  exists,  and  it  is  the  purpose  of  re- 
construction policies  to  restore  an  effective  peace 
organization  with  as  little  friction  and  loss  as  pos- 
sible. 

No  doubt  one  of  the  first  features  which  im- 
presses the  reader  is  the  change  of  relation  between 
the  government  and  industry.  It  is  obvious  also 
that  labor,  capital,  and  industrial  organization  have 

213 


214        PROBLEMS  OF  RECONSTRUCTION 

come  in  for  their  share  of  the  war's  disturbance. 
Foreign  trade  relations,  also,  have  been  seriously- 
affected  ;  and  finally,  a  result  that  is  apt  to  escape 
our  attention  is  the  effect  of  the  war  on  industrial 
development  in  countries  not  engaged  in  the  con- 
flict. Reconstruction  problems  arise  in  all  these 
fields.  We  may  study  the  results  of  the  war  in  the 
order  just  named. 

In  the  previous  chapters  we  have  shown  that 
governments  are  taking  a  much  more  direct  and 
active  interest  in  industrial  affairs  than  ever  be- 
fore. Almost  every  enterprise  that  might  affect 
the  war  program  is  watched  and  controlled.  This 
is  not  intended  as  a  criticism  of  government  inter- 
vention. As  the  administrators  have  frequently 
pointed  out,  the  abrupt  disturbance  of  industrial 
life  by  the  war  has  affected  the  functioning  of 
economic  forces.  They  are  still  at  work,  but  they 
produce  different  results  under  abnormal  conditions. 
It  takes  time  to  establish  a  new  equilibrium ;  but, 
during  the  war  period,  we  cannot  wait  for  the 
uncontrolled  adjustment  to  take  place ;  hence  the 
need  of  control.  This  is  the  justification  of  govern- 
ment intervention  in  economic  affairs  during  the 
war.  Granted  the  value  of  control  as  a  war  policy, 
the  fact  must  not  be  overlooked  that  the  results 
which  flow  from  it  create  one  of  the  greatest  of  the 
after- war  problems. 

One  of  the  most  obvious  results  has  been  the 
strengthening  of  the  position  of  those  who  favor 
closer  government  control  over  industry  as  a  per- 


ECONOMIC   RESULTS  OF  THE  WAR      215 

manent  policy.  They  can  say  now  that  a  vast  or- 
ganization has  been  built  up,  that  it  is  in  full  oper- 
ation, and  that  it  has  met  with  measurable  success. 
We  do  not  have  to  look  far  for  an  illustration.  In 
the  now  well-known  report  on  reconstruction  by  the 
sub-committee  of  the  British  Labor  Party  it  is  urged 
that  '*the  members  of  the  Labor  party,  themselves 
actually  working  by  hand  or  by  brain,  in  close 
contact  with  the  facts,  have  perhaps  at  all  times  a 
more  accurate  appreciation  of  what  is  practicable, 
in  industry  as  in  politics,  than  those  who  depend 
solely  on  academic  instruction  or  are  biased  by  great 
possessions.  But  to-day  no  man  dares  to  say  that 
anything  is  impracticable.  The  war  has  scared  the 
old  political  parties  right  out  of  their  dogmas,  has 
taught  every  statesman  and  every  government  of- 
ficial, to  his  enduring  surprise,  how  very  much 
more  can  be  done  along  the  lines  that  we  have  laid 
down  than  he  had  ever  before  thought  possible."  ^ 
Nothing  could  put  the  point  clearer  than  this.  Any 
one  who  wishes  to  return  to  a  semblance  of  the  old 
order  finds  the  burden  of  proof  resting  heavily  on 
his  shoulders.  That  government  control  is  here, 
and  that  it  works,  is  a  long  sharp  sword  in  this 
scabbard  of  arguments.  Elsewhere  the  report  con- 
tinues:  "Meanwhile,  however,  we  ought  not  to 
throw  away  the  valuable  experience  now  gained  by 
the  government  in  its  assumption  of  the  importa- 
tion of  wheat,  wool,  metals,  and  other  commodities, 
and    in    its    control    of    shipping,    woolen,    leather, 

1  Quoted  from  "New  Republic,"  XIV,  No.  172,  pt.  11,  pp.  3-4. 


216       PROBLEMS  OF  RECONSTRUCTION 

clothing,  boot  and  shoe,  milling,  baking,  butchering, 
and  other  industries.  .  .  .  The  people  will  be 
extremely  foolish  if  they  ever  allow  their  indis- 
pensable industries  to  slip  back  into  the  unfettered 
control  of  private  capitalists,  who  are,  actually  at 
the  instance  of  the  government  itself,  now  rapidly 
combining,  trade  by  trade,  into  monopolistic  trusts, 
which  may  presently  become  as  ruthless  in  their 
extortion  as  the  worst  American  examples."  ^ 

To  those  who  have  long  advocated  close  govern- 
ment control  as  a  permanent  policy  and  who  are 
loath  to  see  the  present  measures  relaxed,  there 
have  been  added  large  numbers  of  converts  who  were 
dissatisfied  with  the  system  as  it  existed  before  the 
war,  and  who  are  willing  to  give  the  new  policy 
further  trial.  It  needs  no  clairvoyant  vision  to 
foresee  that  this  particular  outcome  of  the  war  has 
provided  a  plank  for  some  party  platform,  if  not  the 
platform  itself.  It  is  not  necessary  to  reiterate  the 
argument  that  the  war  has  engendered  in  many 
people  a  new  frame  of  mind,  in  which  the  wish  to 
continue  government  control  is  one  of  the  dominant 
characteristics.  That  we  have  not  discussed  these 
matters  to  any  considerable  extent  in  the  United 
States  is  due  to  the  fact  that  we  have  not  as  yet 
given  serious  thought  to  our  after-war  problems. 

Besides  those  who  favor  the  present  methods  of 

regulation  as  a  permanent  institution,  and  who  have 

found  in  the  war  the  occasion  for  urging  this  policy, 

there  are  others  who  advocate  the  continuance  of 

1  Quoted  from  "New  Republic,"  XIV,  No.  172,  pt.  11,  p.  9. 


ECONOMIC   RESULTS  OF  THE  WAR      £17 

some  measure  of  control  during  the  reconstruction 
period.  In  a  former  chapter  we  referred  to  a  bill 
before  the  English  Parliament  proposing  to  extend 
the  present  import  regulations  for  three  years  after 
the  war.^  This  demand  for  deviation  from  the  old 
policy  is  due  to  the  commercial  disturbances  result- 
ing from  the  conflict.  The  purpose  is  partly  to 
prevent  "dumping"  of  commodities  on  the  English 
markets,  partly  to  protect  some  of  the  new  industries 
against  foreign  competition,  and  partly  to  tide  the 
country  over  the  uncertain  period  after  the  conclu- 
sion of  peace.  The  question  is  raised  whether  this 
does  not  constitute  the  entering  wedge  for  a  new 
commercial  policy  in  which  import  control,  and  later 
possibly  the  regulation  of  exports,  is  to  be  used  as  a 
weapon  of  defense,  analogous  to  protective  tariffs. 
Such  measures  would  be  easier  to  administer  than 
customs  duties,  and  would  have  a  more  immediate 
and  far-reaching  effect.  If  this  is  the  ultimate  out- 
come, the  war  will  have  given  us  a  new  system  of 
foreign  trade  control. 

Again,  in  the  United  States,  serious  consideration 
has  not  been  given  to  such  matters ;  but  the  adop- 
tion of  this  plan  abroad  would  disturb  the  freedom  of 
economic  intercourse  and  possibly  make  necessary 
a  similar  policy  in  this  country.  At  any  event, 
there  is  good  reason  to  believe  that  the  continuance 
of  foreign  trade  regulation  will  find  supporters  in 
America.  In  fact,  some  of  Mr.  Hoover's  arguments 
urged  in  favor  of  the  inauguration  of  the  food  plan 

'  Cf.  ante,  p.  11. 


218        PROBLEMS  OF  RECONSTRUCTION 

will  be  valid  for  the  reconstruction  period.  This 
will  be  true  of  his  plea  that  "the  old  distributive 
safeguards  are  torn  away  by  isolation  from  the 
reciprocal  markets  abroad,"  and  that  the  free  ex- 
port market  has  been  extinguished.^  Indeed,  we 
may  forecast  fluctuating  prices  due  to  the  unusual 
demand  of  European  countries  for  our  products, 
the  existence  of  "wide  margins  of  profits"  among 
all  grades  of  producers  and  distributors,  and  possibly 
the  continuance  of  large  scale  foreign  government 
buying.*  Free  and  open  competitive  markets  may 
not  exist  again  for  some  years.  Moreover,  when  it 
is  considered  that  the  machinery  for  foreign  trade 
regulation  is  already  in  existence,  and  that  the  public 
has  been  trained  to  the  new  methods,  it  can  be  un- 
derstood that  the  advocates  of  continued  control 
have  a  substantial  basis  of  argument. 

Not  only  have  the  war  measures  given  many 
people  a  new  attitude  towards  government  control, 
but  they  have  also  resulted  in  the  building  up  of  a 
great  industrial  war  organization.  In  view  of  our 
discussions  in  former  chapters  it  is  not  necessary  to 
do  more  than  summarize  what  has  been  accomplished 
in  this  field.  Nor  is  it  necessary  to  argue  that  all 
of  this  is  new  to  our  experience  and  much  of  it  is 
foreign  to  the  spirit  of  our  institutions.  However, 
it  is  a  war-created  necessity.     The  program  is  pro- 

1  Cf.  ante,  p.  36. 

2  Com.  Rcpt.,  Dec.  27,  1917,  p.  1177;  Jan.  10,  1918,  p.  116;  Feb.  2, 
1918,  p.  442 ;  May  16,  1918,  p.  611 ;  June  29, 1918,  p.  1226 ;  July  6  1918, 
p.  66 ;  July  16,  1918,  p.  205. 


ECONOMIC   RESULTS   OF  THE  WAR      219 

fessedly  an  emergency  arrangement,  and  it  has  been 
adopted  as  sucli.^  But  this  implies  the  task  of  get- 
ting rid  of  it.  This  explanation  indicates  one  of 
the  fields  in  which  reconstruction  must  take  place. 
By  way  of  summary  it  may  be  said  that  a  great  war 
establishment,  designed  to  regulate  every  kind  of 
activity  that  may  have  any  bearing  on  the  success 
of  the  war,  has  been  superimposed  on  the  peace 
organization.  Because  of  the  intricate  nature  of 
industrial  relations,  there  is  scarcely  an  industry 
which  has  not  been  affected  in  some  way  by  this 
control.  The  new  organization  includes  regulation 
of  prices  of  a  vast  number  of  essential  commodities, 
fixing  of  profit  margins,  regulation  of  the  flow  of 
goods  to  consumers,  arrangements  by  which  a  def- 
inite order  of  consumption  is  established  for  many 
commodities,  measures  for  the  promotion  of  econ- 
omy, rigid  repression  of  some  industries  and  en- 
couragement of  others,  the  control  of  investments 
and  of  foreign  commerce.  Control  thus  includes 
foodstuffs  and  fuels,  and  implements  necessary  for 
their  production,  railroads,  telegraph  and  telephone 
lines,  shipping,  the  regulation  of  the  supply  of  un- 
skilled labor,  and  tribunals  for  the  settlement  of 
disputes  between  employers  and  laborers.  So  vast 
is  this  program,  and  so  rapidly  are  new  elements 
added  to  it,  that  the  organization  can  scarcely  be 
grasped  as  a  whole,  and  the  significance  of  the 
changes  constantly  escapes  attention.  We  have  al- 
ready   shown    that    this    control    is    a    world-wide 

1  Cf.  Chap.  I. 


220        PROBLEMS   OF  RECONSTRUCTION 

phenomenon.^  The  problems  growing  out  of  it, 
therefore,  are  not  peculiar  to  the  United  States. 
It  follows  from  this  that  our  plans  for  reconstruction 
must  consider  changes  both  in  this  country  and 
abroad. 

What  we  have  just  said  refers  principally  to  the 
machinery  of  control.  It  is  impossible  to  under- 
stand the  results  of  the  war  without  observing  this 
machinery  in  action.  Boards,  commissions,  and 
committees  are  only  devices  for  the  accomplishment 
of  certain  industrial  aims.  They  are,  indeed,  a 
new  kind  of  organization,  but  society  is  most  af- 
fected not  by  the  creation  of  new  machinery,  but  by 
its  products.  Unfortunately,  we  have  no  way  of 
ascertaining  now  in  any  adequate  way  what  these 
products  are.  In  fact,  war  control  is  constantly 
producing  new  results.  However,  it  is  possible  to 
suggest  in  a  general  way  what  some  of  the  effects 
of  regulation  are. 

No  part  of  this  machinery  is  destined  to  produce 
greater  economic  results  than  that  which  regulates 
priorities  and  capital  issues.  This,  in  fact,  is  the 
process  designed  to  stimulate  the  transformation 
from  a  peace  to  a  war  basis.  The  effect  of  these  regu- 
lations is  to  divert  investments  and  materials  into 
industries  which  serve  either  war  purposes  or  great 
national  interests.  Certain  groups  of  activities  are 
purposely  stimulated,  others  are  purposely  depressed. 
Many  illustrations  could  be  given.  The  large  war 
demands  for  steel  make  it  necessary  to  rigidly  re- 

1  Cf.  Chap.  I. 


ECONOMIC   RESULTS  OF  THE   WAR      221 

strict  the  manufacture  of  many  kinds  of  tools, 
machines,  and  hardware.  A  study  of  some  of  the 
priority  and  conservation  measures  of  the  War 
Industries  Board  gives  a  clear  idea  of  the  efiFects  of 
these  regulations.^  In  July  1918,  it  was  announced 
as  one  of  the  results  of  an  investigation  by  the  Con- 
servation Division  of  the  Board  that  it  was  found 
advisable  to  discontinue  the  manufacture  of  up- 
wards of  3000  types  of  agricultural  implements. 
This  was  a  conservation  measure  with  several  ob- 
jects in  view,  but  the  most  important  was  saving  in 
the  consumption  of  steel.  The  result  was  the  con- 
centration of  manufacture  on  a  relatively  small 
number  of  types  and  the  elimination  of  all  the  rest.^ 
This  is  not  an  isolated  case.  Other  notable  cases  of 
limitation  of  output  are  found  in  such  great  indus- 
tries as  the  manufacture  of  automobiles,  and  the 
production  of  building  materials,  and  of  course  the 
erection  of  buildings  which  do  not  now  serve  an 
important  national  purpose.^  Besides  the  effects  of 
the  regulations  on  manufactures,  the  limitations  on 
the  use  of  materials  and  funds  cause  a  postponement 
of  many  public  utility  works  and  other  enterprises 
of  a  public  character  which  are  not  now  of  a  press- 
ing social  need. 

Deprived  of  funds  and  of  necessary  materials, 
many  of  the  less  important  industries  are  in  serious 

1  O.  B.,  June  7,  1918,  p.  1 ;  June  24,  1918,  p.  12;  July  31,  1918.  pp. 
9-16. 

'^  Ibid..  My  16,  1918,  p.  13. 

»Wall  St.  Jour.,  March  11,  1918;  April  4,  1918;  AprU  8,  1918; 
April  11,  1918;  May  3,  1918;    May  4,  1918;  May  9,  1918. 


222        PROBLEMS  OF  RECONSTRUCTION 

straits.  Not  only  are  their  markets  seriously  af- 
fected, but  their  equipment  is  deteriorating,  their 
standards  of  efficiency  are  reduced,  and  their  work- 
ing force  is  being  disorganized.  This  presents  the 
picture  of  that  great  group  of  industries  which  do 
not  serve  a  war  purpose.  The  other  picture  that 
must  be  compared  with  it  portrays  the  phenomenal 
development  of  those  industries  which  are  producing 
the  most  essential  commodities.  Provided  as  abun- 
dantly as  our  resources  will  permit  with  labor,  funds, 
and  materials,  they  are  experiencing  rapid  growth. 
In  many  instances  they  are  equipped  with  special- 
ized kinds  of  machinery  and  supplied  with  labor 
trained  in  particular  ways ;  they  have  built  up 
great  organizations  which  are  serving  the  peculiar 
needs  of  the  war.  Thus  the  machinery  of  control 
accomplishes  its  purpose  of  assisting  industries  in 
"going  over"  to  the  war  basis.  The  reorganization 
of  this  great  structure  constitutes  one  of  the  gravest 
of  the  after- war  problems.  Whether  this  is  to  be 
done  under  the  direction  of  the  Government,  or 
whether  industries  are  to  be  permitted  to  make  the 
readjustments  without  the  intervention  of  the 
State,  is  one  of  the  most  important  reconstruction 
issues  both  in  America  and  abroad. 

War  control  has  both  stimulated  and  directed  an 
industrial  transformation  that  would  have  taken 
place  unaided.  But  other  industrial  changes  of 
considerable  moment  have  occurred  which  are  not 
directly  due  to  government  direction.  These  are 
partly  the  result  of  the  demand  for  war  materials, 


ECONOMIC   RESULTS  OF  THE  WAR      223 

and  partly  the  consequence  of  economic  shifts  made 
necessary  by  the  stoppage  of  old  sources  of  supply. 
The  upshot  of  this  development  is  the  growth  of 
some  enterprises  that  were  formerly  of  small  im- 
portance, and  the  creation  throughout  the  world  of 
certain  new  industries.  The  demands  of  the  war 
have  given  a  great  stimulus  to  the  production  of 
tungsten,  molybdenum,  vanadium,  mercury,  alumi- 
num, sulphur,  and  potash,  of  a  number  of  vegetable 
oils,  and  of  certain  kinds  of  chemicals ;  the  pro- 
duction on  a  large  scale  of  chemical  porcelain  and 
heavy  chemicals  in  the  United  States,  and  of  dye- 
stuffs  and  toys  in  this  and  other  countries  is  one 
of  the  results  of  the  war's  disturbance.^  Many 
substitutes  of  more  or  less  permanent  value  result 
from  the  same  cause. ^  Considerable  amounts  of 
capital  have  been  invested  in  these  new  industries, 
and  workmen  trained  to  new  occupations.  Ques- 
tions will  arise  as  to  whether  it  is  worth  while  to 
preserve  such  enterprises  by  some  measures  of 
control  or  protection,  or  whether  they  should  be 
left  to  the  fortunes  of  post-war  competition.  Sim- 
ilar  issues    will  be   raised   in  connection   with   the 

1  Daily  Con.  and  Trade  Rept.,  Oct.  22,  1914,  p.  396;  Dec.  14,  1914, 
p.  1150;  Com.  Rept.,  May  6,  1915,  p.  609;  Jan.  3,  1917,  p.  23;  Dec. 
20,  1916,  p.  1080;  Jan.  8,  1917,  p.  90;  Jan.  15,  1917,  p.  180;  Jan.  24, 
1917,  p.  314;  Jan.  29,  1917,  p.  371;  Wall  St.  Jour..  March  12,  1918; 
Bus.  Dig.,  Sept.  19,  1917,  p.  1487;  Sept.  26,  1917,  p.  1551 ;  Oct.  30,  1917, 
p.  225;  Nov.  28,  1917,  p.  408;  Dec.  26,  1917,  p.  573;  Jan.  16,  1918, 
p.  92;  Jan.  23,  1918,  p.  126;  Feb.  6,  1918,  p.  181;  March  13,  1918,  p. 
346;  March  20,  1918,  p.  366;  March  27,  1918,  p.  405. 

2  Com.  Rept.,  Jan.  8,  1917,  p.  89;  Jan.  10,  1917,  p.  10;  Jan.  11,  1917, 
p.  130;  July  13,  1918,  p.  161 ;  O.  B.,  April  27,  1918,  p.  5. 


224        PROBLEMS  OF  RECONSTRUCTION 

production  of  air  crafts,  shipbuilding,  certain  kinds 
of  raw  materials,  chemicals  and  explosives.  Some 
countries,  possibly,  will  attempt  to  retain  some  of 
the  industries  developed  by  the  war,  and  the  prob- 
lem will  be  presented  of  finding  domestic  and  foreign 
markets  for  the  output. 

War  control  is  destined  to  affect  the  future  of 
many  industries  in  another  way.  With  many  com- 
modities, the  enforced  limitation  on  consumption 
has  only  checked  the  demand  for  the  time  being,  — 
a  result  comparable  to  the  confining  of  a  running 
stream  behind  a  dam.  It  is  probable,  for  example, 
that  the  restrictions  on  the  manufacture  of  many 
kinds  of  tools  and  implements  will  result  in  a  cumu- 
lative demand  in  the  future.  This  may  also  be  the 
case  with  the  great  automobile  industry,  where 
thousands  of  people  have  been  forced  to  forego 
ownership  sheerly  because  of  the  restriction  of  the 
supply,  and  where  thousands  of  others  whose  cars 
are  wearing  out  will  demand  automobiles.  In  a 
number  of  countries  the  emergencies  of  the  war 
have  caused  rigid  restriction  of  building  operations, 
—  except  for  war  purposes,  —  with  the  result  that 
the  building  program  has  not  been  able  to  keep 
pace  with  current  needs. ^  This  demand  must  be 
met  promptly  after  the  war.  Of  more  importance 
is  the  effect  of  the  war  on  the  world's  stock  of  es- 
sential raw  materials.     The  success  in  converting 

iCom.  Rept.,  Nov.  17.  1917,  p.  C57;  O.  B.,  April  12,  1918,  p.  2; 
Bus.  Dig.,  Jan.  16,  1918,  p.  77;  Feb.  6,  1918,  p.  187;  April  10,  1918, 
p.  480;    May  15,  1918,  p.  049;    O.  B.,  June  21,  1918,  p.  2. 


ECONOMIC   RESULTS  OF  THE  WAR      225 

back  from  a  war  to  a  peace  basis  will  depend  to  a 
large  extent  upon  the  rapidity  with  which  the  de- 
pleted stocks  are  restored.  In  some  countries, 
special  committees  are  studying  this  phase  of  post- 
war problems.^ 

No  element  of  economic  life  has  experienced 
more  significant  changes  than  labor.  Great  shifts 
have  occurred  here  as  in  other  departments  of  in- 
dustry, for  the  reason  that  one  of  the  objects  of 
control  has  been  to  divert  laborers,  as  well  as  funds 
and  materials,  to  the  most  important  uses.^  Some- 
times this  process  involved  only  the  transfer  of 
skilled  workers  from  one  plant  to  another  where 
they  followed  the  same  trade ;  but  frequently  the 
shift  made  necessary  the  training  of  men  for  new 
occupations.  Such  was  the  case  with  shipbuild- 
ing, and  in  the  production  of  air  crafts,  munitions, 
and  certain  kinds  of  tools  and  machines.  Besides, 
it  has  been  necessary  to  train  many  additional 
workmen  for  some  of  the  old  machine  trades,  for  the 
reason  that  the  present  supply  was  not  adequate 
for  war  production.  The  significance  of  this  change 
is  that  hundreds  of  thousands  of  workmen  have  been 
given  special  training  in  some  industries  far  beyond 
the  needs  of  peace  production.  The  supply  of  this 
grade  of  labor  after  the  war  will  then  greatly  ex- 
ceed the  demand,  with  no  possibility  whatever  of 
equalizing  the  two  elements.     Another  perplexing 

1  Com.  Rcpt.,  Dec.  28,  1917,  p.  1194;  March  6,  1918,  pp.  854  ff.; 
Bus.  Dig.,  Dec.  26,  1917,  p.  661. 
«  Cf.  Chap.  IV. 
Q 


226        PROBLEMS  OF  RECONSTRUCTION 

problem  for  post-war  solution  arises  from  the  fact 
that  many  workers  have  been  raised  from  the 
grade  of  unskilled  to  skilled  laborers,  with  all  that 
means  for  wages,  standards  of  living,  and  improved 
outlook  for  themselves  and  their  families.  The 
return  of  such  men  to  the  unskilled  group  would  be 
a  social  loss.  Nor  will  they  permit  a  depression  of 
their  present  standards  without  resorting  to  the 
customary  methods  of  resistance.  A  more  obvious 
result  of  the  war  is  the  increase  of  wages  for  all  classes 
of  laborers.  In  many  instances  the  increase  has 
been  only  nominal,  because  the  cost  of  living  has 
also  advanced ;  but  a  survey  of  the  industrial  field 
would  probably  reveal  the  fact  that  many  work- 
men are  actually  better  off  now  than  in  1914.  It 
goes  without  saying  that  no  post-war  policy  which 
fails  to  take  into  account  the  effect  of  the  prospec- 
tive changes  on  this  group  will  avoid  the  evils  of 
labor  unrest.  The  mere  mention  of  the  effect  of 
the  withdrawal  for  military  service  of  several  mil- 
lion men,  of  the  introduction  of  a  large  number  of 
women  into  industry,  and  of  the  employment  of 
thousands  of  persons  in  the  war  organization  of 
the  government,  suggests  readjustment  problems 
which  must  be  solved  promptly  upon  the  conclusion 
of  the  war. 

It  can  scarcely  be  maintained  that  the  war  has 
established  anywhere  in  the  world  a  new  principle 
governing  the  relation  of  labor  and  capital.  It  is 
true  that  in  some  cases  governments  have  taken 
over  certain  industries,  but  usually  this  has  been 


ECONOMIC   RESULTS  OF  THE  WAR      227 

done  with  the  expressed  or  implied  promise  to  re- 
turn the  properties  to  the  owners  after  the  war.^ 
Thus  there  appears  to  be  no  intention  of  establish- 
ing collective  ownership.  On  the  contrary,  the  war 
labor  problems  have  been  worked  out  chiefly  on  the 
basis  of  the  maintenance  of  the  wages  system. 
Here,  also,  it  is  not  clear  that  the  war  policies  promise 
anything  permanent  in  promoting  a  better  spirit  of 
cooperation  between  labor  and  capital.  Uninter- 
rupted work  is  maintained  by  bringing  great  pres- 
sure to  bear  on  all  parties,  and  this,  no  doubt,  re- 
quires considerable  sacrifice  for  every  one  con- 
cerned, —  to  employers,  because  they  fear  that  they 
will  be  forced  to  lose  ground  in  their  contest  with 
labor,  and  to  laborers,  because  they  are  unable  to 
exploit  the  present  emergency  to  gain  additions  to 
their  status.  For  another  reason  the  policy  of  con- 
trol does  not  offer  anything  permanent ;  it  has  not 
met  with  unqualified  success.^  Where  it  works,  the 
patriotic  motive  has  been  the  strongest  of  all  in- 
centives. There  will  be  no  occasion  for  an  appeal 
to  this  sentiment  after  the  war,  with  the  result 
that  the  problem  of  industrial  relationships  will 
have  to  be  worked  out  on  its  merits  with  due 
regard  for  the  interests  of  labor,  capital,  and 
consuming  public. 

It  is  true,  as  we  have  indicated  in  a  former  chapter, 
that  the  war  labor  administration  has  apparently 
strengthened  the  position  of  the  unions  by  giving 
support  to  the  principles   of  collective  bargaining 

»  Cf.  ante.  p.  171.  2  Cf .  ante,  p.  128. 


228        PROBLEMS  OF  RECONSTRUCTION 

and  the  right  of  the  men  to  organize.^  But  the 
ultimate  outcome  of  this  policy  is  veiled  in  uncer- 
tainty. For  the  unions,  it  may  turn  out  to  be  a 
two-edged  sword  which  may  cut  for  or  against  them. 
Since  employers  are  not  required  to  recognize 
unions,  but  only  to  bargain  collectively  with  men 
within  their  establishments,  the  war  labor  policies 
may  mark  the  beginning  of  a  system  of  shop  or- 
ganizations quite  independent  of  the  larger  unions, 
and  having  very  little  in  common  with  them.  Such 
development  would  weaken  the  influence  of  the 
greater  unions.  This  result,  however,  is  pure  con- 
jecture, because  no  tendency  in  this  direction  can 
be  noticed  at  present.  Whatever  the  outcome  of 
the  war  labor  policies  may  be,  the  relations  of  labor 
and  capital  should  be  given  particular  study,  when 
the  time  comes  to  consider  the  questions  of  indus- 
trial reconstruction.  This  will  be  necessary  for  two 
reasons  :  it  will  be  in  the  interest  of  efiicient  pro- 
duction, because  the  lack  of  understanding  between 
employers  and  men  promotes  the  drift  of  laborers 
from  occupation  to  occupation,  lowers  the  produc- 
tivity of  the  men,  and  makes  for  industrial  unrest, 
with  all  its  unfortunate  consequences.  In  the 
second  place,  if  sharp  competition  is  in  prospect  in 
the  future,  the  country  with  most  satisfactory  labor 
policies  will  have  the  best  chances  for  success. 

In  another  field,  the  results  of  the  war  may  be 
learned  with  greater  certainty.  While  industrial 
combination  and  government  regulation  of  big  busi- 

1  Cf .  Chap.  IV. 


ECONOMIC  RESULTS  OF  THE   WAR      229 

ness  are  matters  of  several  decades  of  experience, 
the  war  promises  to  yield  new  developments  in 
both  these  fields.  Two  results  may  be  noted  :  first, 
the  closer  cooperation  between  government  and  in- 
dustry, and  second,  a  new  movement  in  the  direc- 
tion of  combination.  These  changes  are  almost 
world-wide  phenomena.  Whatever  may  have  been 
the  former  attitude  of  our  government  towards 
business,  during  the  war,  at  least,  the  policy  of 
disrupting  the  large  organizations  could  not  be 
followed.  The  country  needed  all  the  support  it 
could  get  from  the  large  units ;  thus  the  war  policy 
has  been,  on  the  one  hand,  to  suspend  most  of  the 
prosecutions  of  combinations,^  and  on  the  other,  to 
encourage  closer  cooperation  within  given  indus- 
tries. The  demands  of  the  war  made  the  latter 
policy  necessary.  In  making  surveys  of  industrial 
resources,  in  fixing  prices  for  government  purchases, 
in  distributing  orders  among  plants,  and  in  en- 
forcing the  regulations,  it  would  have  been  impos- 
sible to  deal  with  industries  as  separate  entities. 
The  most  effective  method  was  to  call  together  the 
representatives  of  the  groups,  and  with  their  aid  ac- 
complish the  results  just  named.  Cooperation  was 
necessary  for  another  reason.  It  would  have  been 
impossible  to  secure  economy  in  men  and  materials 
by  dealing  with  the  industries  separately,  for  it  was 
unreasonable  to  expect  that  the  managers  of  a  given 
enterprise  would  have  been  willing  to  make  sacri- 
fices unless  they  were  assured  that  similar  sacrifices 

1  Bus.  Dig.,  May  8,  1918,  p.  612. 


230        PROBLEMS  OF  RECONSTRUCTION 

were  made  by  others  within  their  group.  Thus,  ac- 
cording to  the  Chairman  of  the  Commercial  Econ- 
omy section  of  the  Council  of  National  Defense : 
"It  must  be  realized  that  business  men  in  any  one 
field  must  join  in  the  common  effort,  because  under 
competitive  conditions  it  will  naturally  be  impos- 
sible for  one  merchant  to  economize  extensively 
without  giving  his  competitors  an  unfair  advan- 
tage." ^  A  third  need  for  cooperation  between 
government  and  business  developed  out  of  the  ad- 
ministration of  import  control.  The  apportionment 
of  a  limited  supply  of  raw  materials  brought  in 
from  the  outside,  and  the  enforcement  of  rules 
covering  the  use  and  distribution  of  the  finished 
products,  could  best  be  accomplished  by  the  indus- 
tries themselves.  Thus  there  developed  the  policy 
of  pooling  a  limited  supply,  and  of  apportionment 
among  the  plants  in  rough  approximation  to  their 
capacities.  This  is  accomplished  by  the  com- 
mittees composed  of  representatives  of  the  indus- 
tries under  authority  of  the  Government.^ 

This  movement  in  the  direction  of  closer  associa- 
tion among  business  units  for  cooperation  with  the 
Government  began  shortly  after  this  country  en- 
tered the  war,  and  has  continued,  largely  under  the 
direction  of  the  Chamber  of  Commerce  of  the 
United  States,  until  all  the  important  industries 
possess  an  organization.^     There  is  a  difference,  of 

»  O.  B.,  May  12,  1917,  p.  5.  ^-  Cf.  ante,  p.  150. 

»0.  B..  May  24,  1917,  p.  3;  June  7,  1917,  p.  3;  June  21,  1917,  p.  4; 
June  25,  1917,  p.  8;  June  29,  1917,  p.  1 ;  July  18,  1917,  p.  2;  Sept.  10, 


ECONOMIC   RESULTS   OF  THE   WAR      231 

course,  between  such  associations  and  others  that 
in  times  past  have  been  declared  unlawful  under  our 
anti-trust  statutes.  In  the  present  case,  there  is 
no  question  about  conspiracy,  monopoly,  and  re- 
straint of  trade.  The  purpose  of  these  organizations 
is  the  accomplishment  of  certain  ends  desired  by 
the  Government,  and  incidentally  the  promotion  of 
the  interests  of  the  trade. ^  But  the  significant  fea- 
ture is  that  it  is  left  largely  to  the  representatives  of 
the  industry  to  see  that  the  regulations  are  made 
effective.  There  is  a  promise  in  this  develop- 
ment of  a  new  attitude  of  Government  to  industry, 
wherein  the  relation  will  be  characterized  by  a 
spirit  of  cooperation  rather  than  by  dissociated 
regulation. 

In  the  case  of  business  combinations,  the  results 
of  the  war  are  more  marked  abroad  than  in  the 
United  States.  Both  the  occasion  and  the  in- 
centive for  further  growth  of  this  movement  are 
lacking  in  this  country.  Here,  many  of  the  essen- 
tial industries  are  already  organized  on  a  huge 
scale,  and  in  the  case  of  the  less  essential  industries, 
the  uncertainties  surrounding  production  tend  to  dis- 
courage combination.  Nevertheless,  there  has  been 
some  progress  in  this  direction,  notably  among 
banks,  which  are  apparently  preparing  for  after-war 

1917,  p.  8;  Sept.  14,  1917,  p.  1;  Sept.  26,  1917,  p.  3;  Sept.  26,  1917, 
p.  1;  Oct.  4,  1917,  p.  1 ;  Dec.  1,  1917,  p.  2;  Dec.  8,  1917,  p.  1;  Dec. 
15,  1917,  p.  3;  Jan.  7,  1918,  p.  1;  Feb.  18,  1918.  p.  2:  May  1,  1918, 
p.  5;  Junel3,  1918,  p.8;  Bus.  Dig.,  Oct.  17,  1917,  p.  138;  Dec.  12, 1917. 
p.  495;  Jan.  30,  1918,  p.  163;  Apr.  24,  1918,  p.  549. 
^  Cf.  ante,  p.  151. 


232        PROBLEMS  OF  RECONSTRUCTION 

commerce,  and  among  some  manufacturers  and  mer- 
chants, who  have  availed  themselves  of  the  new  ex- 
port trade  act.^  In  the  European  countries  the 
reason  for  combination  is  found  chiefly  in  the  de- 
sire to  prepare  for  post-war  competition.  The  case 
for  England  has  been  presented  as  follows:  "The 
financing  of  our  industries  (after  the  war)  will  be 
immensely  facilitated  by  trade  organization.  Dur- 
ing the  war  we  have  seen  our  productive  industries 
organized  on  a  large  scale  and  under  the  control  of 
the  State.  Both  organization  and  control  were 
forced  upon  us  by  the  war.  As  regards  State  con- 
trol, I  hope  and  believe  the  necessity  for  it  is  tem- 
porary. As  to  trade  organization,  I  firmly  believe 
that  the  necessity  for  it  will  remain  after  the  war.  .  .  . 
The  day  of  small  industries  on  individual  lines  is 
gone.  Our  manufacturers  and  traders  must  organ- 
ize for  united  effort.  This  will  have  the  closest 
bearing  on  questions  of  finance.  An  unstable,  un- 
organized industry  is  the  despair  of  bankers.  I  have 
confidence  in  stating  that  an  industry  organized  on 
large  lines  has  seldom  lacked  financial  support  in 
this  country,  and  in  spite  of  the  financial  stringency 
we  shall  doubtless  have  to  face,  it  is  not  likely  to 
suflFer  in  the  near  future."  ^ 

English  banks  seem  to  be  in  the  van  of  the  com- 
bination movement.     We  may  glean  from  the  ex- 

iCf.  Com.  Rept.,  Aug.  19,  1918,  p.  659;  Wall  St.  Jour.,  May  7, 
1918.  Note,  in  this  connection,  the  combination  of  the  express  com- 
panies. The  taking  over  of  the  railroads  virtually  amounts  to  combina- 
tion under  government  control. 

« O.  B.,  Jan.  9,  1918,  p.  8. 


ECONOMIC   RESULTS   OF  THE   WAR      233 

pressions  of  the  financiers  that  this  is  a  step  in  the 
direction  of  preparedness,  for  upon  the  credit  in- 
stitutions will  fall  the  great  burden  of  providing  re- 
sources for  the  reconstruction  of  English  industries. 
The  bankers  are  undoubtedly  keeping  an  eye  on 
similar  developments  in  Germany,  and  at  the  same 
time  are  preparing  for  the  financing  of  English 
trade  and  industry  after  the  war.^  The  results  of 
English  combinations  during  the  past  year  may  be 
summarized  in  the  statement  of  deposits  of  the  five 
leading  English  banks :  London  Joint  City  and 
Midland,  with  deposits  amounting  to  $1,459,950,000 ; 
Lloyd's,  with  $1,430,751,000 ;  London  County,  West- 
minster and  Parr's,  with  $1,070,300,000;  Barclay's, 
with  $1,031,698,000;  and  National  Provincial  and 
Union,  with  $875,970,000.2  ^j-^js  development  has 
not  taken  place  without  opposition  and  without 
serious  thought  on  the  part  of  the  English  public. 
There  is  some  fear  of  a  "money  trust."  Mean- 
while, opposition  has  been  notably  strong  on  the 
part  of  the  discount  houses,  which  desire  as  broad 
a  market  as  possible  for  commercial  bills.  Banking 
combinations  seem  to  meet  with  approval  where 
they  "secure  an  extension  of  area,  or  where  de- 
signed to  secure  important  new  facilities  for  the 
public,"  but  they  are  not  approved  when  they  pro- 
vide   "no    better    facilities,    but    simply    give   pre- 

»Com.  Rcpt.,  June  25,  1918,  p.  1157;    Wall  St.  Jour.,  March  16, 
1918. 

*  Com.  Rept.,  Aug.  15,  1917.  p.  606;  Nov.  24,  1917,  p.  764;  Dec.  29, 

1917,  p.  1206;    Feb.  1,  1918,  p.  417;    March  2,  1918.  p.  804;    April  1, 

1918,  p.  1;  June  25,  1918,  pp.  1156-1157;  Aug.  9,  1918,  p.  536. 


234        PROBLEMS  OF  RECONSTRUCTION 

dominance  due  to  size."  ^  A  committee  appointed 
by  the  British  Treasury  on  March  11, 1917,  reported 
in  favor  of  a  "statutory  committee  representing  the 
Treasury  Department  and  the  Board  of  Trade, 
which  should  have  the  power  to  approve  or  disap- 
prove proposed  amalgamations,"  ^ 

Combination  is  also  going  on  in  industrial  fields. 
Indeed,  this  policy  has  been  urged  upon  industries 
by  some  representatives  of  the  Government.^  A 
report  from  the  American  Consul  at  Birmingham, 
dated  September  19,  1917,  makes  this  point  clear : 
" '  The  policy  of  the  Board  of  Trade,  after  investi- 
gating the  question,'  he  said,^  '  was  that  if  British 
manufacturers  were  going  to  increase  their  export 
trade  after  the  war,  if  they  were  even  going  to  re- 
gain the  trade  lost,  it  was  essential  to  get  together 
in  some  sort  of  a  trade  combination.  They  were 
prepared  to  face  the  question  of  trusts  or  combines. 
If  they  were  to  make  a  stand  against  combinations 
in  other  countries,  it  would  be  necessary  for  them  to 
adopt  methods  somewhat  similar  to  those  which 
were  employed  abroad.'  "  ^  Another  government 
representative  ®  announced  at  the  same  time  that 
"the  department  had  instructed  him  to  take  steps 
which  would  assist  the  formation  of  a  trade  asso- 
ciation of  brass  masters.     The   form    of   the   com- 

»  Com.  Rept.,  June  25,  1918,  p.  1156.  «  Ibid. 

8  New  Republic,  XIV,  No.  172,  pt.  11,  p.  9. 

*  Mr.  L.  A.  Paish,  representing  the  Department  of  Commercial  In- 
telligence. 

B  Com.  Rept.,  Oct.  11,  1917,  p.  148. 

'  Mr.  C.  Hamilton  Wickes,  British  Trade  Commissioner  in  Canada. 


ECONOMIC   RESULTS  OF  THE  WAR      235 

bination  —  the  cartel  or  the  full  merger  type  —  was 
a  matter  for  themselves.  If  they  were  to  live  in 
the  trade  after  the  war,  against  the  organized  com- 
petition of  Germany,  America,  and  Japan,  it  was 
essential  that  they  combine.  If  they  did  not  com- 
bine they  would  go  under."  ^  The  advantages  of 
combination,  as  seen  by  these  men,  were  standard- 
ization of  products,  elimination  of  many  types, 
systematic  investigation  by  the  organization  of 
"any  definite  market  they  wanted  to  attack,"  and 
the  power  afforded  to  "dump"  products  on  foreign 
markets.'^  On  May  8,  1918,  our  Consul  at  Bir- 
mingham announced  that  "the  brass  trade  has  also 
drawn  up  a  project  for  the  establishment  of  the 
cooperative  principle,  the  object  of  which  is  to  set 
up  a  central  buying  organization  and  also  a  cen- 
tral export  selling  agency.  The  scheme  has  met 
with  unanimous  approval  among  those  connected 
with  the  industry."  ^  A  part  of  the  plan  of  the 
proposed  association  was  to  provide  machinery  for 
the  settlement  of  labor  disputes  "on  a  wider  basis 
than  has  been  the  case  in  the  past."  "*  Workmen's 
associations  were  cooperating  with  the  brass  masters 
with  this  end  in  view. 

The  war  has  stimulated  another  type  of  cooper- 
ation among  the  English  steel  producers.  Great 
Britain  was  formerly  dependent  on  Germany  for 
supplies  of  tungsten.  In  order  to  provide  them- 
selves with  an  independent  source  of  supply,  upwards 

1  Com.  Rept.,  Oct.  11,  1917,  p.  148.  *  Ihid. 

3  Ihid.,  June  1,  1918,  p.  839.  «  Ibid. 


236        PROBLEMS  OF  RECONSTRUCTION 

of  thirty  of  the  largest  British  steel  manufacturers 
formed  a  company  known  as  the  High  Speed  Steel 
Alloys  (Ltd.)  with  a  view  to  exploiting  the  resources 
of  some  of  the  Dominions.  Permanent  laboratories 
were  established  at  Tavoy,  Burma,  and  the  manu- 
facturers proposed  the  erection  of  a  plant  to  refine 
the  minerals.^  Even  closer  cooperation  is  in  pros- 
pect for  the  steel  industry.  In  the  early  part  of 
1918,  the  United  Steel  Companies  Limited  was 
formed,  embracing  a  number  of  formerly  independ- 
ent enterprises.  The  American  Consul  at  Sheffield 
announced  on  April  11  of  this  year  that  "it  is  the 
general  impression  in  Sheffield  that  the  present 
combination  is  only  the  nucleus  of  a  much  larger 
combination,  which  will  ultimately  embrace  rolling 
mills  and  allied  trades  generally."  ^  In  a  measure, 
the  prospective  economies  are  the  inviting  causes  of 
the  movement,  but  many  British  manufacturers 
foresee  the  necessity  for  combined  action  both  to 
strengthen  the  industries  during  the  reconstruction 
period,  and  to  regain  their  markets  abroad  in  com- 
petition with  the  large  establishments  of  foreign 
countries.  Combinations  have  taken  place  in  a 
number  of  other  industries,  not  the  least  interest- 
ing of  which  is  that  of  the  London  milk  dealers, 
composed  of  many  of  the  large  limited  companies, 
several  smaller  ones,  and  many  private  concerns.' 
The  capital  is  upwards  of  $20,000,000.     The  com- 

»  Com.  Rept..  Jan.  3,  1017.  p.  23;  Jan.  29,  1917,  p.  371. 
2  Ibid.,  May  9,  1918,  p.  536. 
^Ibid.,  Nov.  2,  1917,  p.  456. 


ECONOMIC   RESULTS  OF  THE  WAR      237 

bination  is  due  chiefly  to  the  exigencies  of  the  war. 
Thus,  the  need  of  saving  labor  and  capital  due  partly 
to  the  British  regulations,  economies  in  deliveries, 
the  difficulties  involved  in  apportioning  and  dis- 
tributing a  limited  supply  of  milk,  and  financial 
difficulties,  were  some  of  the  causes  involved. 

An  organization  of  a  more  general  kind  is  the 
Federation  of  British  Industries,  formed  as  a  result 
of  a  meeting,  on  July  20,  1916,  of  many  representa- 
tives of  British  industries.  The  objects  in  view 
were  "cooperation  of  manufacturers  with  labor, 
with  the  Government,  and  with  each  other  in  sup- 
port of  their  common  interests."  ^  Among  the 
many  effects  of  the  war  on  British  industry,  there- 
fore, we  are  to  add  the  great  stimulus  it  has  given 
to  cooperation  and  to  the  promotion  of  large-scale 
production. 

A  similar  tendency  characterizes  the  war  period 
in  German  industry.  While  combination  has  been 
a  notable  feature  in  Germany  for  a  number  of 
years,  the  exigencies  of  the  war  have  given  not  only 
a  new  impetus,  but  also  a  new  bent  to  the  move- 
ment. The  tremendous  demands  for  arms  and 
munitions  of  all  kinds  could  only  be  supplied  from 
her  own  establishments.  Hence,  the  great  need  of 
conserving  both  men  and  materials  and  of  estab- 
lishing industry  on  the  most  effective  basis.  This 
could  best  be  accomplished  by  concentration.  In 
the  case  of  other  industries  also,  the  problems  in- 
volved in  obtaining  labor  and  funds  offered  solution 

1  Com.  Rept..  Sept.  12,  1916,  p.  967. 


238        PROBLEMS  OF  RECONSTRUCTION 

through  greater  economies.  Besides,  the  country 
was  cut  off  from  suppHes  of  important  raw  mate- 
rials. Confronted  with  these  difficulties  the  policy 
adopted  was  the  concentration  of  industrial  efforts 
in  a  relatively  few  selected  plants,  the  allocation  to 
these  of  the  limited  supply  of  materials,  and  the 
closing  of  other  establishments  with  provisions  either 
for  stock  ownership  in  the  operating  plants  by  the 
stockholders  in  the  factories  that  were  closed,  or  a 
promise  of  remuneration  of  some  sort  at  the  close  of 
the  war.^  In  short,  along  with  the  policy  of  cur- 
tailment went  that  of  combination.  In  many  in- 
stances combination  became  not  only  necessary  but 
compulsory.  According  to  Mr.  Chauncey  Depew 
Snow  :  "In  war  time  the  concentration  of  individual 
cartels  into  syndicates,  proceeded  with  much  greater 
impetus,  and  a  new  phenomenon  appeared,  in  the 
formation  of  so-called  compulsory  cartels.  The  gov- 
ernment had  entire  control  over  all  the  industries 
that  had  any  particular  war  significance.  With 
little  or  no  regard  for  '  hurt  trade, '  factories  in  par- 
ticular industries  were  closed  up,  and  production 
concentrated  in  such  factories  and  such  centers  as 
were  economical.  Machinery  was  transported  to 
whatever  point  It  could  be  used  to  best  advantage, 
and  workers  were  steered  by  the  oflScials  to  centers 
where  they  were  most  needed.  The  government 
itself  formed  certain  big  government  companies, 
such  as  the  War  Grain  Company,  to  control  the 

^  Misc.  Series,  No.  65,  German  Trade  and  the  War,  Snow  and  Krai 
(Dept.  Com.  publication),  pp.  55  ff. 


ECONOMIC   RESULTS  OF  THE   WAR      239 

grain  trade;  and  in  these  cases  such  trades  became 
government  monopolies.  The  first  of  the  com- 
pulsory syndicates  seems  to  have  been  the  boot  and 
shoe  industry.  This  was  followed  early  in  1917,  by 
the  compulsory  syndication  of  the  soap  industry."  ^ 
Since  that  time  other  new  syndicates  have  been 
brought  into  existence,  and  the  agreements  of 
many  of  the  older  ones  have  been  extended.^ 

If  the  war  made  necessary  this  policy,  the  future 
difficulties  of  obtaining  raw  materials  and  shipping, 
and  the  need  of  organizing  most  effectively  to  re- 
gain lost  markets  will  probably  require  a  continu- 
ation of  this  method.  Already  the  plans  include 
combinations  under  government  direction  for  the 
purchase  of  materials  abroad,  and  selling  combina- 
tions as  of  old,  except  under  more  careful  govern- 
ment supervision.  Many  of  the  industries  may 
remain  in  the  hands  of  the  Government,  which  will 
endeavor,  through  such  monopolies,  to  lighten  the 
burden  of  taxation.^  German  plans  for  the  future 
include  another  form  of  associative  enterprise  which 
suggests  such  organizations  as  the  British  Trade 
Corporation  and  the  American  International  Cor- 
poration. The  German  organization  is  known  as  the 
Company  for  International    Enterprise.     Its   prin- 

1  Printer's  Ink,  April  25,  1918,  pp.  77  ff.  (C.  D.  Snow,  German  Monop- 
olies as  Trade  Weapons). 

»  Com.  Rept.,  Nov.  6,  1915,  p.  531;  Dec.  31,  1917.  p.  1229;  May  6, 
1918,  p.  489;  May  7,  1918,  p.  507;  June  1,  1918,  p.  847;  Bus.  Dig., 
Nov.  7,  1917,  pp.  262  ff. ;  March  27,  1918,  pp.  404,  414,  422;  May  8, 
1918,  p.  605;  May  15,  1918,  p.  048;  May  22,  1918,  p.  661. 

3  Printer's  Ink,  April  25,  1918,  pp.  77  ff. 


240        PROBLEMS  OF  RECONSTRUCTION 

cipal  purpose  is  to  lend  financial  support  to  German 
enterprises  abroad,  and  in  some  cases  to  purchase 
such  enterprises.^  Some  of  its  activities  will  include 
the  operation  of  street  and  steam  railways,  the  con- 
struction of  irrigation,  harbor,  and  electric  works, 
building  of  factories  of  every  description,  and  the 
exploitation  of  plantations  and  ore  fields.  It  is 
expected  that  the  organization  will  establish  sub- 
sidiaries and  extend  credit  to  all  manner  of  enter- 
prises. All  this,  to  be  sure,  is  for  the  promotion  of 
German  trade  and  for  the  development  of  German 
industries.  Among  the  firms  represented  on  the 
board  of  directors  of  the  new  company  are  such  well- 
known  organizations  as  the  North  German  Bank, 
the  Dresdner  Bank,  Hamburg-American  Line,  Rhen- 
ish Westphalian  Coal  Syndicate,  Siemens  and  Schu- 
kert,  and  some  of  the  Krupp  interests.^ 

The  war  has  also  stimulated  the  combination 
movement  in  other  belligerent  and  in  neutral  coun- 
tries.' The  policy  of  export  control  of  England, 
France,  and  the  United  States  has  been  partly  re- 
sponsible for  collective  action  within  neutral  coun- 
tries to  control  trade ;  but  in  addition,  there  is  a 
growing  tendency  to  project  large  organizations, 
often  under  the  supervision  of  the  State,  for  the 
purchase  of  important  commodities.     The  purchase 

1  Com.  Rept.,  April  16,  1918,  p.  219. 

«  Ibid..  May  4,  1918,  p.  1G5. 

'Ibid..  Dec.  11,  1915,  p.  996;  Dec.  27,  1915,  p.  1185;  Jan.  4,  1917, 
p.  S8;  March  3,  1917,  p.  847;  April  16,  1918,  p.  213;  May  14,  1918, 
p.  599;  June  29,  1918,  p.  1  (Supplement) ;  July  20,  1918,  p.  8  (Supple- 
ment) ;  July  20,  1918,  p.  259. 


ECONOMIC   RESULTS  OF  THE  WAR      241 

of  nitrates  by  our  own  Department  of  Agriculture 
for  sale  to  American  farmers  is  an  illustration  of  this 
policy  as  applied  to  the  United  States,  and  an  ex- 
ample on  even  a  larger  scale  is  the  purchase  of  food- 
stuffs and  certain  raw  materials  for  the  United 
States  and  her  associates  through  an  American 
government  agency.^  England  affords  a  number  of 
illustrations  of  this  policy  as  applied  to  war  condi- 
tions, and  a  similar  example  is  found  in  the  French 
consortium,  or  syndicate,  which  acts  in  behalf  of 
the  Government.^  These  lessons,  taught  by  the  war, 
will  probably  be  applied  extensively  in  the  future. 
Thus,  an  American  commercial  attache  writing  from 
Paris  in  July  1918  announced  that  "the  American 
manufacturer  who  looks  forward  to  selling  articles 
needed  for  the  reconstruction  of  the  destroyed  indus- 
tries of  France  should  prepare  for  a  revolutionary 
change  of  French  methods  of  purchasing  when  the 
war  ends.  Instead  of  selling  to  thousands  of  in- 
dividual buyers  the  materials  each  will  need  to  re- 
build his  destroyed  or  damaged  factory  the  American 
manufacturer  will  deal  with  a  small  number  of  cen- 
tral purchasing  agencies,  representing  groups  of 
French  manufacturers  engaged  in  the  same  or  re- 
lated industries  and  assisted  by  the  credit  of  the 
French  government."  ^  In  some  instances,  the 
State  may  assume  the  responsibility  of  supplying 

10.  B.,  July  11,  1917,  p.  3;  Sept.  12,  1917.  p.  4;  Sept.  26,  1917, 
p.  7;  Sept.  29,  1917,  p.  2;  Nov.  28,  1917,  p.  9. 
»  Com.  Rept.,  Sept.  12,  1918,  pp.  965  ff. 
»  76Mi.,  Aug.  27,  1918,  p.  773. 
B 


242        PROBLEISIS  OF  RECONSTRUCTION 

stricken  manufacturers  with  raw  materials,  machin- 
ery, and  tools  ;  in  this  case,  purchases  may  be  put  in 
the  hands  of  a  central  bureau  under  the  control  of 
the  Government.  Similar  measures  are  in  prospect 
for  Belgium  where  the  Comptoir  National  pour  la 
Reprise  de  I'Activite  Economique  has  been  created 
to  aid  in  the  reconstruction  of  the  country.^  It 
will  assist  in  the  purchase  of  tools,  machinery,  and 
raw  materials.  It  is  expected  that  this  organization 
will  not  only  be  of  material  aid  in  the  reconstruction 
of  Belgium,  but  that  it  will  alleviate  the  sufferings 
of  the  working  classes  by  enabling  them  to  go  to 
work  promptly  in  the  reconstructed  shops.  The 
organization  is  interested  in  all  branches  of  indus- 
try, since  practically  all  branches  are  in  need  of 
rehabilitation. 

The  upshot  of  this  development  is  the  grouping 
of  industries  in  combinations,  or  cooperation  among 
industries,  on  a  scale  that  the  world  has  never  known 
before.  Frequently  such  organizations  come  into 
existence  with  the  sanction  of  the  Government; 
sometimes  they  are  under  the  direct  supervision  of 
the  Government.  Organization  has  moved  on  apace. 
We  are  passing  beyond  the  bounds  of  even  "super- 
organization"  to  something  larger  and  more  power- 
ful. Combined  into  great  compact  units,  the  in- 
dustries of  some  of  these  nations  present  a  solid 
front  to  foreign  buyers  and  sellers.  This  forecasts 
a  new  competition  in  the  foreign  field  in  which  in- 
dividuals no  longer  compete  with  individuals.     The 

1  Com.  Rept.,  June  6,  1918,  p.  897. 


ECONOMIC   RESULTS  OF  THE  WAR      243 

competitors  are  combined  groups  of  industries. 
Competition  tends  to  become  national  unit  com- 
petition, and  the  individual  business  enterprise 
drops  into  the  background.  Evidently,  the  power 
of  such  organizations  both  for  conquest  and  for 
destruction  is  greater  than  ever  before.  This  de- 
velopment gives  a  new  aspect  to  foreign  trade 
policies  and  imposes  a  serious  task  on  those  who 
are  to  recommend  our  reconstruction  plans. 

The  war  has  affected  the  industries  of  the  nations 
in  another  way.  Import  and  export  regulations  have 
been  powerful  factors  in  affecting  old  trade  rela- 
tions.^ But  added  to  these  are  the  distorting  effects 
of  the  lack  of  shipping,  the  depression  of  some  kinds 
of  industries  throughout  the  world  owing  to  the  in- 
ability to  market  the  products,  the  stimulation  of 
other  industries  within  national  boundaries  because 
of  the  curtailment  of  the  customary  sources  of 
supplies  from  the  great  manufacturing  countries, 
and  the  unusual  opportunities  given  to  some  of  the 
neutrals  to  develop  their  trade  because  of  the  re- 
moval of  competition  on  the  part  of  the  belligerents. 
To  a  large  extent,  trade  has  been  diverted  into  new 
channels,^  some  industries  have  been  greatly  stimu- 
lated in  every  part  of  the  world,  and  others  have 
been  depressed.  In  the  case  of  our  own  trade, 
there  has  been  a  marked  shifting  of  the  character  of 
imports    and    exports.^      The   rigid   restrictions    on 

»  Cf.  ante.  p.  180. 

2  Americas,  Jan.  1918,  pp.  1  ff. ;  Bus.  Dig.,  Feb.  20,  1918,  '248  ff. ; 
Daily  Cons,  and  Trade  Reports,  Oct.  7,  1914,  p.  117;  Nov.  ii.'S,  1914, 
p.  8C5 ;  Com.  Rept.,  Mar.  2,  1915,  p.  859.     »  Ibid.,  Dec.  11,  191(),  p.  952. 


244        PROBLEMS  OF  RECONSTRUCTION 

foreign  lending  by  the  richer  nations  has  checked 
industrial  growth  in  many  of  the  poorer  countries. 
The  development  of  plantations,  railways,  port 
facilities,  industries,  and  mineral  deposits  has  been 
checked,  unless  these  contributed  in  some  impor- 
tant way  to  the  resources  of  the  belligerents.  Many 
illustrations  could  be  given  of  all  these  results.  A 
brief  study  of  the  changes  that  have  taken  place 
in  English  foreign  loans  suggests  the  effect  of  the 
war  on  those  countries  that  have  formerly  depended 
on  British  capital  for  development.  In  1913  the 
capital  publicly  subscribed  in  the  London  market 
for  investment  in  the  dominions  amounted  to  about 
$370,000,000;  in  1915,  to  approximately  $108,000,- 
000  ;  in  the  former  year,  the  subscriptions  for  foreign 
loans  amounted  to  $410,000,000,  but  in  the  latter 
to  only  $203,000,000,  of  which,  in  1915,  the  amount 
extended  to  France  was  $116,000,000.^  A  detailed 
study  of  the  reports  shows  that  many  foreign  coun- 
tries were  shut  off  altogether.*  The  extent  to  which 
government  borrowing  absorbed  the  resources  of  the 
London  market  is  indicated  by  the  fact  that  of 
capital  subscriptions  aggregating  $3,374,755,000 
in  1916,  the  Government  was  charged  with 
$3,352,300,000.8  The  course  of  French  loans  is 
quite  like  that  of  the  British ;  meanwhile,  German 
lending  abroad,  except  to  her  allies,  came  to  an  end, 

1  Com.  Rept.,  July  19,  1915,  p.  305;  Feb.  3,  1916,  p.  469;  Aug.  3, 
1916,  p.  434. 

» Ibid.,  Feb.  3,  1916,  p.  469. 
3  Ibid..  Aug.  3,  1916,  p.  434. 


ECONOMIC   RESULTS  OF  THE   WAR      245 

and  the  United  States  has  advanced  relatively  small 
amounts  for  the  development  of  resources  and  in- 
dustries of  countries  beyond  its  borders.  It  is  quite 
in  accord  with  the  figures  given  above  that  the  re- 
ports that  come  from  many  parts  of  the  world  in- 
dicate a  slowing  down  of  construction  works  of  all 
descriptions.^ 

On  the  other  hand,  there  is  considerable  evidence 
to  show  that  certain  kinds  of  industries  throughout 
the  world  have  been  stimulated  by  war  conditions. 
This,  of  course,  is  notably  the  case  of  those  enter- 
prises that  contribute  to  the  war  whether  these  are 
situated  within  the  belligerent  countries  or  in  the 
borders  of  some  of  the  nearer  neutrals.  The  stimu- 
lating effect  of  the  war  on  certain  industries  in  the 
United  States,  England,  France,  and  Germany  is 
well  known.  With  regard  to  Italy,  an  American 
consul  recently  reported  that  "the  war  has  injected 
new  life  into  the  manufacturing  industries  of  Italy. 
The  greatest  progress  is  seen  in  the  chemical,  elec- 
trical, and  metallurgical  industries,  which  now  pro- 
duce hundreds  of  articles  that  before  the  war  had 
to  be  obtained  from  abroad.  In  all  lines  of  indus- 
try, however,  consolidations  of  companies,  increases 
of  capital,  and  extensions  of  existing  plants  are  the 
order  of  the  day."  ^     At  a  recent  exhibition  in  Lon- 

iCom.  Rept..  Nov.  22,  1916.  p.  718;  Aug.  6,  1917.  p.  6  (Supple- 
ment); Com.  Rept.,  Aug.  21.  1918,  p.  696;  Bus.  Dig.,  Feb.  13,  1918, 
p.  216;   March  13,  1918,  p.  357. 

»  Com.  Rept.,  April  26,  1918,  p.  353;  May  25,  1918,  p.  760;  July  20, 
1918  (Supplement),  p.  3;  Economic  World,  May  4,  1918,  p.  622;  Bus. 
Dig.,  May  29,  1918,  p.  715. 


246        PROBLEMS  OF  RECONSTRUCTION 

don  were  displayed  hundreds  of  commodities,  the 
products  of  industries  that  have  arisen  since  1914.^ 
Germany  has  taken  special  pride  not  only  in  her 
new  commodities,  but  also  in  a  great  variety  of 
substitutes  brought  into  existence  as  the  result  of 
the  war.* 

The  difficulties  in  obtaining  products  from  cus- 
tomary sources  have  compelled  enterprise  all  over 
the  world  to  establish  industries  locally  to  supply 
wants.  Some  notable  instances  are  new  manufac- 
tures of  iron  and  steel,  textiles,  boots  and  shoes, 
food  products,  machine  parts,  and  the  construction 
of  ships.  Referring  to  South  American  countries,  a 
recent  Commerce  Report  contains  the  following : 
*'The  serious  dislocation  of  trade  occasioned  in  vir- 
tually all  Latin  American  countries  by  the  war  has 
in  the  case  of  Brazil  brought  about  changes  of  such 
far-reaching  significance  as  to  mark  a  new  period  of 
growth  in  the  industrial  and  commercial  life  of  that 
country."  Elsewhere  it  was  said:  "The  war  has 
caused  a  marked  increase  in  the  demand  for  Ar- 
gentine wheat,  meat,  wool  and  for  Chilean  nitrates 
and  copper;  and  since  these  products  represent  the 
bulk  of  the  exports  of  those  countries,  their  total 
exports  have  expanded  remarkably."  ^  Indeed,  in 
many  of  the  countries  there  has  been  a  marked 
tendency  in  the  direction  of  diversification  of  indus- 

1  Com.  Rept.,  Sept.  10,  1918,  p.  936. 

2  Ibid.,  Dec.  20,  191G,  p.  1078;  Jan.  8,  1917,  p.  89;  Jan.  10,  1917,  p. 
10;  July  13,  1918,  p.  161;  O.  B.,  Sept.  25,  1917,  p.  2;  April  27,  1918, 
p.  5;  Sept.  10,  1918,  p.  942. 

«  Com.  Rept.,  Aug.  26,  1918,  pp.  756  ff. 


ECONOMIC   RESULTS  OF  THE  WAR      247 

tries  and  towards  self-sufficiency  in  the  production 
of  a  number  of  commodities.  This  is  indicated 
by  reports  from  South  Africa,  AustraHa,  Norway, 
Sweden,  Denmark,  to  say  nothing  of  some  of  the 
South  American  countries.^  Such  developments  are 
significant  not  only  because  they  give  these  coun- 
tries new  industries,  but  because  of  their  prospective 
effect  on  the  future  course  of  trade,  and  on  the  com- 
mercial policies  of  these  countries  after  the  war. 
We  may  forecast  a  considerable  extension  of  the  pro- 
tective system  as  a  method  of  defending  the  new 
industries,  and  possibly  the  use  of  some  of  the  new 
methods  of  import  and  export  control  for  the  same 
purpose. 

We  have  reserved  the  case  of  Japan  for  separate 
study.  Industrial  transformation  in  this  country 
has  been  greater  than  in  any  other  outside  the  war 
zone.  This  is  shown  to  some  extent  by  the  growth 
of  her  commerce.  Her  imports  which  declined 
from  $363,622,000  in  1913  to  $296,974,000  in  1914 
rose  to  $516,343,000  in  1917;  and  exports  declining 
from  $315,281,000  in  1913  to  $294,664,000  in  1914 
rose  to  $799,098,000  in  1917.2  That  the  imports 
were  contributing  more  and  more  to  the  manufac- 
turing industry  of  the  country  is  indicated  by  the 

1  Daily  Cons,  and  Trade  Reports,  Oct.  12,  1914,  p.  204 ;  Com.  Rept., 
Oct.  20,  1917,  p.  282;  Feb.  7,  1918,  p.  507;  Com.  Rept.,  Feb.  23,  1918, 
p.  1  (Supplement) ;  May  11,  1918,  p.  5C1 ;  May  29,  1918,  p.  808;  July 
17,  1918,  p.  214;  July  19,  1918,  pp.  1-3  (Supplement);  Aug.  14,  1918, 
p.  596 ;  Aug.  15,  1918,  p.  613 ;  Aug.  16, 1918,  pp.  62G,  636 ;  Aug.  21,  1918, 
p.  694;  Aug.  22,  1918,  pp.  705,  708;  O.  B..  Sept.  21,  1917,  p.  5. 

«  Com.  Kept.,  Feb.  19,  1918,  pp.  665-666. 


248        PROBLEMS  OF  RECONSTRUCTION 

fact  that  the  largest  increase  was  found  in  raw 
materials  and  partly  manufactured  goods,  and  of 
these  raw  cotton  and  steel  plates  were  among  the 
most  notable  instances  of  growth.  While  prior  to 
the  war  the  imports  of  raw  materials  were  gaining 
steadily  at  the  expense  of  manufactured  goods,  this 
movement  has  become  more  marked  since  1914.^ 
Indeed,  one  might  reach  this  conclusion  from  the 
fact  that  many  new  industries  have  been  founded  in 
the  last  four  years.  This  development  has  taken 
place  in  the  production  of  chemicals,  iron  and  steel, 
zinc,  aluminum,  and  lead,  in  the  manufacture  of 
textiles,  paints,  oils,  boots  and  shoes,  to  name  only 
some  of  the  most  important.^  Meanwhile,  there 
has  been  a  notable  change  in  the  character  of  new 
investments.  While  interest  formerly  centered  in 
such  enterprises  as  banking,  railways,  and  the  elec- 
trical industries,  the  new  capital  is  being  invested  in 
iron  works,  paper  mills,  the  manufacture  of  drugs 
and  dyes,  paints,  textiles,  and  to  some  extent  in  the 
exploitation  of  foreign  mineral  and  agricultural 
resources.' 

Shortly  after  the  beginning  of  the  war  the  country 
inaugurated  an  ambitious  plan  of  expansion.  As 
early  as  November  12,  1914,  at  an  extraordinary 
meeting  of  the  Yokohama  Chamber  of  Commerce  res- 
olutions were  adopted  requesting  the  various  min- 
isters to  urge  upon  the  Government  the  extension 

»  Com.  Rept.,  Feb.  19,  1919,  pp.  665-666. 

»  Ibid.,  Dec.  22,  1917,  pp.  1123  ff. 

»  Ibid.,  May  17,  1916,  p.  632;  Sept.  8,  1916,  pp.  923  S. 


ECONOMIC   RESULTS  OF  THE  WAR      249 

of  Japanese  steamship  service  to  Italy,  Spain,  and 
Portugal  in  order  to  encourage  direct  trade  with 
those  countries,  to  establish  a  legation  in  Argentina, 
and  to  negotiate  commercial  treaties  with  Russia 
with  the  intent  of  securing  lower  import  duties  into 
that  country.^  Early  in  1915  the  South  Sea  Associ- 
ation was  formed  for  the  purpose  of  investigating 
the  industrial  and  social  conditions  of  the  South 
Sea  Islands  and  of  familiarizing  the  consumers  of 
that  part  of  the  world  with  Japanese  goods. ^  Mean- 
while, the  business  interests  of  Japan  are  reaching 
out  for  trade  in  New  Zealand,  Australia,  South 
Africa,  and  in  South  and  Central  America.  A  bus- 
iness commission  visited  South  Africa  early  in  1917 
to  investigate  trade  conditions.'  It  was  announced 
that  Japan  could  use  a  number  of  products  of  that 
part  of  the  world,  such  as  wool,  mohair,  asbestos,  and 
tobacco.  The  Japanese  consul  was  said  to  have 
announced  that  the  export  trade  from  South  Africa 
to  his  country  had  a  "great  future."  ^  The  imports 
from  Japan  into  this  section  increased  from  $520,000 
in  1912  to  $1,830,000  during  the  first  nine  months 
of  1916.^  This  country  is  further  laying  the  foun- 
dation for  future  industrial  and  commercial  develop- 

1  Daily  Cons,  and  Trade  Reports,  Dec.  31,  1914,  p.  1391. 

2  Cora.  Rept.,  March  11,  1915,  p.  999. 

^Ibid.,  Dec.  31,   1915,  p.   1267;   Aug.  17,  1916,  p.  628;   Sept.  29. 
1916,  p.  1215;   Oct.  14,  1916,  p.  187;   Dec.  21,  1916,  p.  1093;   Dec.  23, 

1916,  p.  1136;   Feb.  5,  1917,  p.  473;   Feb.  20,  1917,  p.  697;   March  31, 

1917,  p.  1214;   April  27,  1917,  p.  354;   May  15,  1917,  p.  542;   May  17, 
1917,  p.  626;   Aug.  20,  1917,  p.  071. 

*  Ibid..  Jan.  13,  1917,  p.  165. 
6  Ibid.,  Feb.  5,  1917,  p.  473. 


250        PROBLEMS  OF  RECONSTRUCTION 

ment  by  founding  branch  banks  in  many  of  the  im- 
portant industrial  centers  of  the  world,  by  seeking 
the  development  of  independent  sources  of  raw 
materials,  such  as  iron  ore,  cotton,  wool,  and  wheat, 
and  by  developing  her  merchant  marine.^  At  the 
same  time,  efforts  are  being  made  to  improve  the 
quality  of  Japanese  exports  and  to  protect  the 
brands.  For  this  purpose  encouragement  is  given 
to  the  formation  of  trade  guilds  one  of  whose  func- 
tions is  to  inspect  goods  destined  for  export.^  In 
sum,  the  effect  of  the  war  on  Japan  has  been  greatly 
to  stimulate  enterprise,  to  afford  the  occasion  for 
the  establishment  of  many  new  industries  and  for 
the  extension  of  many  old  ones,  and  to  greatly 
strengthen  her  financial  and  industrial  position.  In 
their  effort  to  reestablish  trade  in  many  of  the 
world  markets  the  western  countries  will  now  en- 
counter a  strong  competitor. 

In  the  field  of  general  commercial  policy  the  war 
promises  to  yield  important  results.  Unfortunately, 
many  of  the  plans  for  the  future  deviate  from  the  old 

1  Com.  Rept,  Sept.  2,  1915,  p.  1118;  July  22,  1916,  p.  282;  Oct.  17, 

1916,  p.  212;  Nov.  28,  1916,  p.  793;  Jan.  25,  1917,  p.  330;  Jan.  30, 

1917,  p.  392;  Feb.  19,  1917,  p.  673;  Feb.  24,  1917,  p.  740;  March  7, 
1917,  p.  866;  March  12,  1917,  p.  9.32;  March  27,  1917,  p.  1141 ;  July  10, 

1917,  p.  106;  Nov.  5,  1917.  p.  487;  Feb.  28,  1918,  p.  775;  March  5, 

1918,  p.  836;  March  8,  1918,  p.  894;  June  17,  1918,  p.  1049;  June  24. 
1918,  p.  1146;  June  25,  1918,  p.  1154;  Aug.  29,  1918,  p.  681;  Bankers' 
Magazine,  Nov.  28,  1917,  p.  414;  Bus.  Dig.,  Nov.  24,  1917,  p.  313; 
Bus.  Dig.,  April  24,  1918,  p.  550;  O.  B.,  Oct.  4,  1917,  p.  3;  Oct.  30, 

1917,  p.  5;  Dec.  18,  1917,  p.  7;  Jan.  31,  1918,  p.  1;  Feb.  9,  1918,  p. 
6;  April  4,  1918,  p.  15. 

»  Com.  Rept.,  March  3,  1917,  p.  847;  Aug.  2,  1917,  p.  425;  Jan.  28, 

1918,  p. 368. 


ECONOMIC   RESULTS  OF  THE   WAR      251 

freedom  of  intercourse.  They  portend  rather  com- 
mercial wars  in  which  trade  rivals  will  be  purposely 
handicapped.  Boycotts,  methods  of  retaliation, 
preferential  treatment  of  certain  favored  sections, 
and  new  commercial  alliances  among  the  great 
nations,  are  some  of  the  proposals.  The  reconstruc- 
tion plans  of  most  of  the  European  countries  call  for 
an  extensive  overhauling  of  the  old  trade  policies 
always  with  the  view  of  regulation  and  control. 

The  war  methods  of  the  belligerents  of  controlling 
exports  and  imports  have  introduced  new  ways  of 
regulating  commerce  and  have  resulted  in  the  estab- 
lishment of  a  great  organization  to  make  the  regula- 
tions effective.  It  is  difficult  to  foretell  what  the 
ultimate  results  will  be,  but  already  we  have  indica- 
tions that  some  countries  will  continue  the  war-time 
methods.  The  proposed  English  legislation  has 
been  referred  to  on  a  former  page.^  Many  British 
manufacturers  look  with  apprehension  on  such 
measures,  and  with  good  cause,  because  they  have 
felt  severely  the  repression  of  war  control  and 
realize  fully  what  regulation  means.  Many  would 
prefer  to  take  their  chances  with  post-war  com- 
petition if  only  the  State  would  let  them  alone. 
But  the  Government  may  take  the  position  that  this 
is  a  necessary  course,  at  least  for  several  years. 

Another  British  measure  for  post-war  regulation 
is  aimed  at  German  control  of  certain  essential  raw 
materials.  The  Nonferrous  Metal  Act  was  intro- 
duced into  the  House  of  Commons  in  November 

1  Cf.  ante,  p.  10. 


252        PROBLEMS  OF  RECONSTRUCTION 

1917 ;  it  received  royal  assent  February  6,  1918.* 
The  title  of  the  law  indicates  that  its  purpose  is  to 
restrict  "temporarily  the  persons  who  may  engage 
in  business  connected  with  certain  nonferrous  metals 
and  metallic  ores."  The  persons  referred  to,  as  the 
act  subsequently  shows,  are  those  of  enemy  national- 
ity or  enemy  connections.  The  measure  includes 
zinc,  copper,  tin,  lead,  nickel,  aluminum,  and  other 
nonferrous  metals  and  ores  which  the  Board  of 
Trade  may  designate  by  order.  It  is  not  lawful 
"for  any  company,  firm,  or  individual  after  the 
expiration  of  six  months  from  the  passing  of  this 
act,  or  such  longer  period  as  the  Board  of  Trade 
may  generally  or  in  any  particular  case  allow,  to 
carry  on  the  business  of  winning,  extracting,  smelt- 
ing, dressing,  refining,  or  dealing  by  way  of  whole- 
sale trade  in  metal  or  metallic  ore  to  which  this  act 
applies,  unless  licensed  to  do  so  by  the  Board  of 
Trade."  ^  Licenses  are  to  be  granted  in  prescribed 
form  after  certain  requirements  are  fulfilled,  in- 
cluding the  furnishing  of  information  and  the  pay- 
ment of  a  small  fee.  Under  certain  prescribed  con- 
ditions, enemy  status  or  enemy  connections  justify 
the  refusal  of  a  license.  Even  the  definite  limit  set 
for  the  duration  of  this  act  will  probably  carry  the 
control  into  the  peace  period ;  but  at  the  discretion 
of  the  Board  the  act  may  be  made  operative  for  an 
indefinite  time. 

1  Com.  Rept.,  April  1,  1918,  pp.  4-6. 

2  Americas.  December  1917,  pp.  16  ff. ;   Bus.  Dig.,  May  13,  1918,  pp. 
353-354. 


ECONOMIC  RESULTS  OF  THE  WAR      253 

Such  measures  have  temporary  control  for  their 
object.  But  other  plans,  such  as  the  proposed 
customs  union  of  Austria-Hungary  and  Germany, 
the  Paris  Economic  Pact,  and  the  program  of  eco- 
nomic imion  of  the  British  empire,  are  expected  to  be 
more  or  less  permanent,  and  if  fully  worked  out 
would  bring  about  a  new  situation  in  foreign  trade 
relations.  These  arrangements  are  designed  to  es- 
tablish trade  alignments  with  varying  degrees  of 
preference  for  the  members  of  the  groups.  Such 
measures  would  divide  a  considerable  part  of  the 
world  into  economic  spheres  of  interest ;  within 
each  sphere  the  members  would  be  given  certain 
advantages ;  those  outside  would  suffer  such  handi- 
caps as  the  alliance  was  able  to  impose,  or  at  least, 
would  be  denied  valuable  privileges.  Trade  would 
not  even  move  freely  within  the  groups,  because 
the  members  would  be  bound  by  their  treaty  agree- 
ments to  grant  preferences  regardless  of  world 
market  conditions.  Such  measures  would  impose 
much  greater  restrictions  on  commerce  than  those 
which  prevailed  in  pre-war  days. 

On  October  21,  1915,  the  Vienna  Chamber  of 
Commerce  unanimously  adopted  a  declaration  of 
policy  in  regard  to  the  future  economic  relations 
with  the  German  empire.^  Some  members  of  the 
Chamber  were  of  the  opinion  that  the  prospective 
industrial   upheaval   which   would   result   from   the 

iCom.  Rept.,  Feb.  11,  191G,  pp.  582-583;  Mi.sc.  Series,  No.  65 
(Bu.  For.  and  Dom.  Com.),  p.  141,  Snow  and  Krai,  German  Trade  after 
the  War. 


254        PROBLEMS  OF  RECONSTRUCTION 

war  made  it  necessary  for  Austria-Hungary  to  sup- 
plement her  military  and  political  alliance  with  Ger- 
many with  an  economic  union.  It  was  hoped  that 
such  a  union  would  make  the  Central  Powers  more 
independent  of  their  opponents  with  reference  to 
foodstuffs,  raw  materials,  and  industrial  products, 
and  would  enable  them  to  defend  with  greater  energy 
their  commercial  interests  in  the  markets  of  the  world. 
The  proposed  treaty  was  to  have  the  longest  pos- 
sible duration.  This  policy  was  to  be  regulated  by 
a  unified  plan  by  which  the  two  empires  would  act 
as  a  unit  in  negotiating  commercial  treaties.  Mutual 
support  would  enable  them  to  bring  their  economic 
powers  to  full  development,  lower  their  costs  of  pro- 
duction, enable  industry  to  become  more  specialized, 
and  secure  for  both  countries  an  increasing  share  of 
international  commerce.  Said  the  resolution:  "In 
order  to  secure  the  necessary  freedom  of  action  for 
the  conclusion  of  such  a  treaty,  it  is  requisite  that 
the  two  Governments,  in  consideration  of  their 
respective  economic  needs,  shall  agree  upon  their 
common  commercial  demands  even  before  the  be- 
ginning of  peace  negotiations.  Especially  is  it  to 
be  desired  that  the  commercial  union  of  the  Central 
Powers  shall  be  recognized  in  the  peace  treaties 
with  other  States,  and  that  every  claim  to  most 
favored  nation  treatment  shall  be  excluded  at  the 
outset."  ^ 

This  is  a  remarkable  document  when  it  is  remem- 
bered that  certain  portions  of  Austria-Hungary  are 

1  Com.  Rept.,  Feb.  11,  1916,  pp.  582-583. 


ECONOMIC  RESULTS  OF  THE  WAR     255 

in  great  fear  of  the  industrial  power  of  Germany. 
Commenting  further  upon  the  plan  a  French  writer 
said  recently:  "It  appears  that  the  Germans  and 
the  Austrians  have  decided  to  erect  certain  portions 
of  Austrian  territory  into  market  zones  reserved  to 
Austrian  cartels.  The  grouping  into  cartels  of  all 
establishments  in  the  same  industry  both  in  Ger- 
many and  Austria  in  effect  makes  possible  the  de- 
limitation of  exclusive  markets.  Here  we  see  an 
ideal  regime  of  free  competition.  All  of  Austria- 
Hungary  and  Germany,  one  might  add,  all  of 
Europe,  will  live  henceforth  under  a  regime  of 
monopoly  in  the  form  of  trusts  and  cartels."  ^ 

The  statement  of  this  program  makes  sufficiently 
clear  what  its  elements  are.  A  considerable  part 
of  the  most  productive  portion  of  Europe  is  to  be 
drawn  together  in  close  economic  union  to  bargain 
for  commercial  privileges  with  the  rest  of  the  world. 
It  is  a  combination  of  nations  both  for  the  promo- 
tion of  home  industries  and  for  foreign  commercial 
conquest.  Their  collective  power  is  to  be  used  to 
obtain  the  best  terms  possible  and  to  grant  favor 
sparingly  in  return.  Meanwhile,  the  demands  of 
the  two  empires  are  to  be  based  on  a  survey  of  their 
industrial  needs.  The  plan,  of  course,  involves  bar- 
gaining enforced  by  all  the  pressure  that  these  powers 
can  bring  to  bear. 

The  Allies'  Economic  Pact  presents  another  aspect 
of  international  commercial  agreements.     From  June 

^  Bernard  Lavergne,  L'Union  Commerciale  des  Allies  Aprls  la  Guerre, 
pp.  1-2,  note. 


256        PROBLEMS  OF  RECONSTRUCTION 

14  to  17,  1916,  representatives  of  the  Allied  Govern- 
ments met  at  Paris  for  the  purpose  of  fulfilling  the 
mandate  of  the  Paris  conference  of  March  28,  1916, 
to  give  "practical  expression  to  their  solidarity  of 
views  and  interests,  and  of  proposing  to  their  re- 
spective Governments  the  appropriate  measures  for 
realizing  this  solidarity."  ^  The  Nonferrous  Metal 
Act,  discussed  on  a  former  page,  was  a  bit  of  legisla- 
tion passed  in  conformity  with  this  plan.  The  read- 
ing of  the  pact  seems  to  indicate  that  it  is  a  de- 
fensive alliance.  Thus  the  concluding  resolution 
states  that:  "Whereas  for  the  purposes  of  their 
common  defense  against  the  enemy  the  Allied  Powers 
have  agreed  to  adopt  a  common  economic  policy,  on 
the  lines  laid  down  in  the  Resolutions  which  have 
been  passed,  and  whereas  it  is  recognized  that  the 
effectiveness  of  this  policy  depends  absolutely  upon 
these  Resolutions  being  put  into  operation  forth- 
with, the  Representatives  of  the  Allied  Governments 
undertake  to  recommend  their  respective  Govern- 
ments to  take  without  delay  all  the  measures, 
whether  temporary  or  permanent,  requisite  for  giv- 
ing full  and  complete  effect  to  this  policy  forthwith, 
and  to  communicate  to  each  other  the  decisions 
arrived  at  to  attain  that  object."  ^ 

The  Pact  provides  three  groups  of  policies ;  namely, 
for  the  war  period,  for  the  transitory  or  reconstruc- 
tion period,  and  permanent  measures  of  mutual 
assistance    and    collaboration    among    the    Allies. 

^  Recommendations  of  the  Economic  Conference  of  the  Allies  (Lon- 
don, Cd.  8271).  p.  6.  *  Ibid.,  p.  8. 


ECONOMIC  RESULTS   OF  THE  WAR      257 

The  essence  of  this  document,  as  one  may  gather 
from  a  study  of  its  provisions,  is  to  put  the  Allies  on 
an  economic  defensive  against  malicious  German 
methods  of  trade.  We  are  interested  principally  in 
the  permanent  measures,  since  these  will  affect  the 
future  relations  among  the  nations.  However,  we 
may  present  briefly  the  reconstruction  policy.  The 
principal  factors  under  this  caption  are  the  con- 
servation of  the  resources  of  the  Allies  for  each  other's 
benefit,  the  denial  to  enemy  countries  of  favored 
nation  treatment,  prevention  of  pursuit  by  the 
enemies  of  certain  professions  and  industries  which 
concern  national  defense  and  economic  independence, 
and  the  fixing  by  agreement  of  a  period  "during  which 
the  commerce  of  the  enemy  powers  shall  be  sub- 
mitted to  special  treatment  and  the  goods  originating 
in  their  countries  shall  be  subjected  either  to  pro- 
hibitions or  to  a  special  regime  of  an  effective  char- 
acter." ^ 

While  many  of  these  provisions  are  vague,  their 
evident  purpose  is  defense.  The  Allies  are  con- 
fronted with  two  possibilities,  both  unfavorable, 
namely,  the  determination  of  Germany,  even  when 
defeated,  to  secure  economic  domination ;  and 
second,  the  necessary  sacrifice  of  industrial  and 
trade  advantages  to  aid  the  other  parties  to  the 
agreement.  It  is  a  question  of  choice  between  two 
evils.  If  the  threat  of  German  domination  is  great, 
self-sacrifice  is  the  better  of  the  two  policies.      As 

'  Recommendations  of  the  Economic  Conference  of  the  Allies  (Lon- 
don, Cd.  8271),  pp.  6-7. 
s 


2o8        PROBLEMS  OF  RECONSTRUCTION 

long  as  world  commerce  is  surrounded  with  threats, 
trading  cannot  be  free,  and  defensive  methods  are 
necessary.  Whether  the  reconstruction  measures  of 
the  Allies  will  succeed  depends  largely  on  their  will- 
ingness to  make  the  sacrifices  involved  in  the  policy. 
The  permanent  measures  may  be  grouped  under 
three  titles.  They  include  means  for  making  the 
Allies  independent  of  their  enemies  as  regards  raw 
materials  and  manufactured  articles  essential  for  the 
normal  development  of  their  economic  activities, 
methods  for  promoting  trade  among  the  Allies, 
and  provisions  for  uniform  laws  covering  patents, 
trademarks,  and  copyrights.  None  of  these  meas- 
ures have  a  hostile  intent.  They  do  not  indicate 
the  purpose  of  aggression,  at  least  as  they  are  stated. 
Indeed,  the  third  provision,  if  carried  out,  will  tend 
to  promote  more  friendly  relations  by  removing 
some  of  the  causes  of  misunderstanding.  It  is  a 
step  in  the  direction  of  greater  uniformity  in  the 
conditions  of  trade.  The  first  policy  is  undoubtedly 
inspired  by  the  revelation  of  German  methods  of 
expansion,  and  is  justifiable  as  a  means  of  defense. 
Its  scope,  moreover,  is  limited,  for  it  covers  only 
the  essentials  for  "normal  development,"  however 
that  may  be  interpreted.  It  is  expected,  under  this 
title,  that  the  Allies  will  adopt  certain  measures  to 
secure  independence  of  Germany  in  the  case  of 
raw  materials,  and  commercial  and  financial  or- 
ganization. The  policy  also  contemplates  State 
assistance  for  certain  enterprises  of  a  specially  de- 
sirable character,  such  as  the  promotion  of  scientific 


ECONOMIC  RESULTS  OF  THE  WAR      259 

research,  and  special  plans  for  the  development  of 
national  resources  and  industries.  Possibly,  the 
policy  also  involves  customs  duties  ''of  a  temporary 
or  permanent  character."  Said  the  Pact:  "What- 
ever may  be  the  methods  adopted,  the  object  aimed 
at  by  the  Allies  is  to  increase  production  within 
their  territories  as  a  whole  to  a  sufficient  extent  to 
enable  them  to  maintain  and  develop  their  economic 
position  and  independence  in  relation  to  enemy 
countries."  ^  All  of  this  section,  in  short,  is  a  sort  of 
declaration  of  economic  independence  of  Germany. 
The  dangers  of  the  situation  make  this  necessary. 

The  Paris  Pact  is  an  illustration  of  some  of  the 
new  policies  called  into  existence  by  the  war.  It  is 
doubtful  whether  the  proposed  measures  can  be 
largely  carried  out,  and  it  is  regrettable  that  they 
are  deemed  necessary,  but  they  are  an  incident  of 
present  trade  rivalries  and  are  an  indication  of  the 
kind  of  measures  that  will  be  advocated  where  inter- 
national traders  stand  in  need  of  protection  against 
the  unfair  methods  of  their  opponents.  In  this  con- 
nection, the  opinion  of  an  English  authority  is  to 
the  point :  "As  regards  the  special  case  of  Germany, 
I  am,  of  course,  of  opinion  that,  until  peace  is  con- 
cluded, a  vigorous  trade  war  is  not  merely  justifi- 
able, but  is  imposed  by  the  necessities  of  the  case. 
I  may  go  farther  than  this  and  say  that  even  after 
the  war,  if  the  political  institutions  of  Germany  re- 
main unchanged,  if  they  still  constitute  a  menace  to 

'  Recommendations  of  the  Economic  Conference  of  the  Allies  (Lon- 
don, Cd.  8271),  pp.  6-8. 


260        PROBLEMS  OF  RECONSTRUCTION 

the  peace  of  the  world,  and  if  the  German  Govern- 
ment still  continues  to  adopt  commercial  methods 
for  the  attainment  of  political  objects  and  military 
advantages,  the  trade  war  may  justifiably  be  con- 
tinued and  economic  considerations  may,  while  such 
a  state  of  things  lasts,  remain  in  abeyance.  .  .  . 
If  we  should  in  the  future  have  to  deal  with  a 
changed  Germany,  any  attempt  to  boycott  that 
country  would  involve  our  losing  a  good  customer 
and  at  the  same  time  debarring  ourselves  from 
using  such  of  the  products  of  Germany  as  may 
profitably  and  advantageously  be  imported  into 
this  country."  ^ 

The  policies  discussed  above  cover  arrangements 
among  groups  of  nations.  In  addition,  there  are 
suggestions  of  closer  economic  union  among  some  of 
the  European  neutrals  and  among  some  of  the  South 
American  countries  embodying  the  principles  of 
preference.  Meanwhile,  the  war  has  stimulated 
discussions  of  plans  of  another  description  which 
promise  to  affect  international  trade  in  another 
way.  We  refer  to  the  discussions  favoring  closer 
economic  union  among  the  elements  of  the  British 
empire.  This  program  is  not  new,  but  the  circum- 
stances of  the  war  give  it  a  peculiar  interest. 

In  the  summer  of  1918,  the  Imperial  War  Con- 
ference and  the  Imperial  War  Cabinet  held  impor- 
tant sessions  in  London,  at  which  matters  of  im- 
perial policy  were  presented.  The  reports  of  the 
meetings  were  meager,  but  from  the  proposals  made 

^  The  Earl  of  Cromer  and  others,  After  War  Problems,  pp.  23-iMi. 


ECONOMIC  RESULTS  OF  THE  WAR      261 

public  we  may  gather  the  drift  of  the  discussions. 
One  important  topic  for  debate  was  the  future  con- 
trol of  raw  materials  within  British  dominions.  It 
was  announced  that  arrangements  were  being  made 
with  representatives  of  the  dominions  for  the  con- 
trol of  such  products  as  a  basis  for  negotiation  with 
the  Allies  for  joint  action  after  the  war.  It  was 
stated  that  this  was  one  of  the  most  serious  of  the 
post-war  problems.  Some  definite  progress  had 
been  made  in  Great  Britain  with  the  view  of  making 
the  future  regulations  effective.^  The  Nonferrous 
Metal  Act  was  discussed,  and  the  dominions  were 
requested  to  enact  laws  similar  to  those  of  England. 
In  addition,  there  were  various  proposals  relating  to 
effective  means  for  the  development  of  the  trade  of 
the  empire,  including  such  matters  as  transport, 
news  service,  parcels  post,  statistics,  and  emigration. 
Apparently,  the  question  of  imperial  preference 
tariffs  received  little  or  no  consideration. ^ 

Other  parts  of  the  empire  have  been  discussing 
elements  of  the  policy  outlined  above.  Resolutions 
adopted  at  a  meeting  of  the  Chamber  of  Com- 
merce of  South  Africa  on  September  12,  1916, 
favored  a  substantial  rebate  in  favor  of  the  prod- 
ucts and  manufactures  of  the  British  empire,  the 
principle  of  customs  preference  to  British  allies  pro- 
vided they  granted  reciprocal  favors,  reciprocal 
tariff  relations  with  other  countries,  and  special 
tariff  arrangements  against  the  products  of  enemy 

1  Com.  Rept.,  Aug.  24,  1918,  pp.  737  B. 

»  Ibid.,  p.  740. 


262        PROBLEMS  OF  RECONSTRUCTION 

countries.^  Early  in  1917,  the  South  African  Cham- 
ber of  Manufactures  approved  of  the  objects  of  the 
British  Empire  Producers'  Association,  and  passed 
resolutions  urging  cooperation  to  create  a  self-suf- 
ficing empire  embodying  the  principle  of  prefer- 
ence.2  At  an  earlier  date,  a  similar  organization  in 
Canada  advocated  a  "fraternal  and  cooperative 
spirit  between  Canada  and  her  sister  dominions  and 
colonies  and  the  empire."  ^ 

An  even  larger  plan  of  imperial  union  has  been 
discussed  from  time  to  time  since  the  beginning  of 
the  war.  Some  of  the  leading  elements  are  the 
establishment  by  government  ownership,  or  by  sub- 
sidy, of  several  great  lines  of  steamships  connect- 
ing various  parts  of  the  empire;  an  inter-imperial 
plan  for  harbor  development;  a  system  of  govern- 
ment rate  regulation  covering  shipping  and  marine 
insurance  on  routes  between  ports  of  the  empire; 
government  control  of  at  least  one  cable  and  tele- 
graph line;  encouragements  for  an  extensive  plan 
of  scientific  and  technical  research ;  preferential 
employment  of  British  capital  and  of  British  com- 
mercial institutions  in  the  development  of  the  re- 
sources of  the  empire ;  a  British  trade  corporation  to 
assist  in  the  expansion  of  imperial  commerce ;  exten- 
sive development  of  the  industries  of  the  colonies ; 
reorganization  of  the  system  of  intelligence;  an 
empire  sj^stem  of  preference  for  British  industry  in 

'  Com.  Rept.,  Dec.  15,  1916,  p.  1021. 
^Ibid.,  May  21,  1917,  p.  687. 
8  Ibid.,  May  19,  1915,  p.  809. 


ECONOMIC  RESULTS  OF  THE  WAR      263 

the  supply  of  raw  materials  in  which  the  empire  has 
a  monopoly,  or  a  dominant  position;  and  the  ex- 
clusion of  non-British  influence  from  public  com- 
modity and  financial  markets.^ 

The  inauguration  of  some  of  the  elements  of  this 
policy  would  raise  serious  problems  for  other  coun- 
tries. Measures  on  the  part  of  Great  Britain  and 
her  dominions  to  exclude  outsiders  from  the  enor- 
mous benefits  of  their  markets  would  have  an  im- 
portant effect  on  industry  everywhere  in  the  world. 
Some  of  the  elements  in  this  plan  are  for  the  pur- 
pose of  empire  development,  and  in  the  normal  course 
of  events,  would  redound  to  the  benefit  of  foreign 
industry  and  commerce;  but  the  reverse  would  be 
the  case  with  the  application  of  the  principle  of  pref- 
erence whether  adopted  for  commodities,  shipping, 
insurance,  or  capital.  Undoubtedly,  the  adoption  of 
this  element  of  the  program,  if  the  purpose  is  to  dis- 
criminate against  foreigners,  would  encounter  many 
diflBculties.  It  probably  involves  the  imposition  by 
Great  Britain  of  a  general  tariff,  and  this  in  itself 
would  encounter  opposition.  Besides,  preferences 
which  seriously  discriminated  against  the  outside 
world  would  invite  evasions.^  Other  important  is- 
sues are  involved,  namely,  the  probable  unwiUing- 
ness  of  the  dominions  to  relax  their  protective  sys- 
tem in  the  face  of  the  great  manufacturing  power  of 
England,  the  added  burden  to  English  industries 
which  would  result  from  a  duty  on  raw  materials, 

1  Americas,  Feb.  1918,  pp.  1  ff . ;  Bus.  Dig..  April  10,  1918,  pp.  472  ff. 
*  After  War  Problems,  op.  cit.,  p.  20. 


264        PROBLEMS  OF  RECONSTRUCTION 

and  the  unfavorable  effect  of  the  preferential  ar- 
rangements on  British  commerce  with  the  outside 
world.  The  larger  part  of  English  and  dominions* 
trade  is  foreign,  and  it  is  not  probable  that  a  prefer- 
ence system  would  be  adopted  that  would  threaten 
the  most  productive  part  of  this  commerce.^  But 
in  whatever  manner  the  plan  is  developed  it  will 
afiFect  the  commerce  of  other  countries,  and  it  must, 
therefore,  be  studied  by  such  countries  in  framing 
their  reconstruction  policies. 

No  discussion  of  the  results  of  the  war  would  be 
complete  without  reference  to  the  revelations  of 
German  methods  of  economic  expansion.  Reac- 
tions on  these  methods  are  largely  responsible  for 
the  new  turn  taken  by  the  commercial  policies  of 
some  of  the  nations.  Recent  writings  of  French  and 
English  authorities  contain  a  scathing  indictment  of 
the  German  system.'  Dibblee,  for  example,  sum- 
marizes the  eflFects  of  economic  penetration  as  fol- 
lows:  "The  most  astonishing  achievement  of  Ger- 
man successful  aggression  occurred,  perhaps,  in 
Italy,  where,  by  the  foundation  of  the  Banca  Com- 
merciale  Italiana,  the  whole  commercial  life  of 
Italy  has  been  enslaved,  and  in  spite  of  the  European 
war  is  still  under  German  domination.  An  interest- 
ing fact  in  the  case  of  Italy  is  that  the  stranglehold 

*  After  War  Problems,  op.  cit.,  pp.  25-27;  G.  B.  Dibblee,  Germany's 
Economic  Position,  pp.  65-73. 

'  Henri  Hauser,  Les  Mfithodes  Allemandes  d'Expansion  Economique, 
passim;  G.  B.  Dibblee,  Germany's  Economic  Position, pp.  49  ff. ;  Maurice 
Millioud,  Ruling  Caste  and  Frenzied  Trade  in  Germany,  pp.  79  £f. ;  E. 
J.  Dillon,  Why  Italy  Went  to  War,  passim. 


ECONOMIC  RESULTS  OF  THE  WAR     265 

obtained  by  Germany  on  her  commerce  was  effected 
by  means  of  using  the  money  of  the  ItaHan  people 
themselves,  who  hold  64  per  cent  of  the  share  capital 
of  the  Banca  Commerciale,  while  less  than  5  per 
cent  is  held  by  Germany  itself.  Yet  the  whole 
power  remains  in  the  hands  of  an  energetic  minority 
of  German  directors.  Switzerland,  commercially 
speaking,  is  now  treated  as  little  better  than  a  Ger- 
man province,  and  Russia,  in  fact,  was  so  much  in 
the  grip  of  German  industrialism  that  she  was  not 
able  to  exert  her  full  strength  until  almost  two  years 
after  the  beginning  of  the  present  war."  ^ 

The  same  story  is  told  of  Spain.  "Wherever  a 
factory  or  a  factory  site  is  offered  for  sale,"  said  an 
American  writer,  "the  jBrst  and  best  bidders  are 
Germans,  If  there  is  the  slightest  likelihood  of  a 
mining  property  being  put  on  the  market  the  owners 
get  a  polite  inquiry  from  an  interested  Teuton.  If 
the  output  of  farm,  orchard,  flock  or  herd  is  to  be  sold, 
you  will  discover  the  Germans  are  hotfoot  after  it. 
Advertise  a  water-power  project  and  almost  before 
the  paper  is  on  the  street  a  representative  of  Ale- 
mania  —  the  Spanish  for  Germany  —  is  on  the  job. 
All  this  means  that  by  every  known  device  of  pre- 
paredness the  German  is  getting  ready  to  do  bus- 
iness in  Spain  in  a  big  way  when  the  war  is  over."  * 
In  South  America  a  powerful  campaign  is  in  prog- 
ress to  discredit  the  products  of  the  United  States 
and   other  countries.     German   banks   are  already 

^  Dibblee,  op.  cit.,  pp.  47,  48. 

*  Saturday  Evening  Post,  March  16,  1918,  p.  98. 


266        PROBLEMS  OF  RECONSTRUCTION 

firmly  rooted  in  the  soil,  and  the  increased  German 
influence  in  Spain  is  to  be  made  use  of  after  the 
war  to  prosecute  the  fight  against  German  trade 
rivals.  The  inclusion  of  a  large  number  of  firms  in 
the  enemy  trading  list  of  the  United  States  and  its 
associates  is  a  step  to  thwart  this  influence.^ 

Some  of  the  principal  methods  of  unfair  competi- 
tion as  employed  by  Germany  are  commercial  es- 
pionage, "dumping,"  stifling  of  competitors'  indus- 
trial opportunities  through  various  methods  of  mo- 
nopolistic control,  misbranding  of  goods  to  conceal 
their  origin,  production  and  sale  of  imitations,  prop- 
aganda designed  to  disparage  the  commodities  of 
competitors  and  to  create  ill  will  for  a  nation  and  its 
products,  and  the  control  of  advertising  and  of  piv- 
otal materials.  One  of  the  fortunate  results  of  the 
war  has  been  to  bring  into  glaring  spotlight  these 
various  methods  as  practiced  by  Germany  and  thus 
to  afford  the  knowledge  for  devising  defensive 
measures, 

A  general  survey  of  the  results  of  the  war  would 
show  both  gains  and  losses.  It  is  true  that  the  world 
stock  of  essential  materials  has  been  depleted,  that 
the  machinery  in  many  industries  is  wearing  out 
through  inability  to  make  repairs,  that  the  peace 
organization  has  been  badly  disrupted,  and  that 
much  wealth  has  been  consumed  in  ways  which  do 
not  contribute  to  industrial  progress.  But,  on  the 
other  hand,  Industrial  enterprise  the  world  over  has 

^  Cumulative  Supplement  to  the  Enemy  Trading  List,  No.  2  (March 
15,  1918,  pp.  8-20). 


ECONOMIC   RESULTS  OF  THE   WAR      267 

received  a  great  stimulus.  This  is  seen  in  the 
movement  favoring  technical  and  scientific  research, 
in  the  promotion  of  better  business  organization,  in 
the  development  in  many  countries  of  keener  insight 
into  business  problems,  in  the  discovery  of  many 
new  commercial  products,  and  in  the  promise  of 
better  cooperation  between  Governments  and  indus- 
try. No  plan  of  reconstruction  would  be  adequate 
which  proposed  only  to  repair  the  losses  of  the  war. 
The  utilization  of  the  principal  gains  of  the  conflict 
are  just  as  essential  to  any  reconstruction  program 
as  the  recovery  of  losses  and  the  orderly  establish- 
ment of  a  new  peace  order. 


CHAPTER  VIII 
RECONSTRUCTION  m  FOREIGN  COUNTRIES 

The  European  countries  have  taken  the  lead  in 
framing  reconstruction  policies.  They  have  already 
developed  extensive  plans  and  have  done  something 
to  give  these  plans  concrete  and  definite  application. 
It  is  fully  recognized  abroad  that  extensive  read- 
justments must  be  made  immediately  after  the  con- 
clusion of  peace,  that  some  measures  must  be  worked 
out  beforehand,  that  emergency  laws  will  not  satisfy 
the  new  conditions,  and  that  the  wisest  plan  is  to 
subject  the  whole  after- war  economic  situation  to 
thorough  study.  For  this  purpose  the  work  is  put 
in  the  hands  of  specially  constituted  bodies  who  are 
well  equipped  for  the  task.  They  are  studying  these 
problems  in  a  scientific  way  with  the  expectation 
that  their  recommendations  will  be  followed  by  the 
Governments  in  framing  the  post-war  policy.  Since 
we  must  look  to  European  countries  for  our  earliest 
lessons  in  drawing  up  our  reconstruction  system, 
and  since  what  they  do  will  necessarily  affect  us, 
we  should  study  at  some  length  their  proposed  re- 
construction measures. 

As  a  rule,  this  study  of  reconstruction  is  in  charge 
of  some  specially  appointed  body,  separate  from  the 
war  organization,  aided  by  numerous  committees 

268 


IN  FOREIGN  COUNTRIES  £69 

whose  function  is  to  work  out  various  aspects  of  the 
after- war  problems.  We  shall  discuss  presently,  in 
considerable  detail,  the  plans  of  England  and  Ger- 
many ;  but  it  is  helpful  at  this  point  to  outline  the 
steps  taken  in  these  and  other  countries. 

In  England  the  work  is  in  the  hands  of  the  Min- 
istry of  Reconstruction  which  is  aided  by  numerous 
subcommittees.  Somewhat  the  same  method  is 
followed  in  Germany.  Late  in  1916,  the  Office  of 
the  Imperial  Commissary  for  Transition  Economy 
undertook  the  task  of  framing  a  reconstruction 
policy.  Its  earliest  functions  were  to  study  prob- 
lems related  to  the  supply  of  foodstuffs  and  raw 
materials,  exchange  matters,  and  the  distribution  of 
tonnage.  The  Imperial  Ministry  of  Economics  was 
created  on  October  21,  1917,  and  the  Imperial  Com- 
missary was  made  subordinate  to  it.^  More  re- 
cently, a  greater  council  has  been  created  composed 
of  upwards  of  250  members  who  are  competent  to 
speak  with  authority  on  the  various  matters  that  will 
confront  the  country  after  the  war.  This  body  is 
known  as  the  Transition  Economy  Parliament.^ 
It  is  divided  into  some  twenty  subcommittees  for 
the  study  of  particular  problems. 

Of  all  the  belligerents  Belgium  is  in  the  most  cry- 
ing need  of  a  carefully  planned  policy  of  recon- 
struction. Practically  the  whole  industrial  and 
social  structure  has  been  destroyed,  and  it  will  be 
necessary  to  construct  a  new  organization  as  soon 
as  possible  so  that  the  stricken  country  may  resume 

1  Board  of  Trade  Journal,  Jan.  31,  1918,  pp.  123  ff.  « Ibid. 


270        PROBLEMS  OF  RECONSTRUCTION 

promptly  its  varied  activities.  Early  in  January 
1918,  the  King  of  Belgium  created  a  Ministry  of 
Economic  Affairs  charged  with  the  duty  of  making 
preparation  for  this  work.  According  to  the  plan, 
this  new  department  is  assisted  by  a  council  com- 
posed of  about  50  members  connected  with  the  in- 
dustrial and  social  life  of  the  country.^  To  a  large 
extent,  an  organization  created  about  the  first  of 
May  1918,  known  as  the  Comptoir  National  pour  la 
Reprise  de  I'Activite  Economique  en  Belgique,  will 
make  provision  for  the  material  reconstruction  of  the 
country.  This  body  is  to  help  restore  industry  and 
trade  by  assisting  in  the  purchase  of  tools  and  raw 
materials  and  by  directing  the  reorganization  of  the 
industries.*  Since  the  whole  economic  life  of  the 
country  has  to  be  restored,  the  Comptoir  is  inter- 
ested in  practically  everything  that  contributes  in 
a  material  way  to  that  end.  It  will  probably  super- 
vise, or  control  the  purchase  of  building  materials, 
leather,  textiles,  farm  implements,  chemical  products, 
electrical  supplies,  and  many  other  commodities 
needed  for  the  prompt  reestablishment  of  business. 
In  Italy,  also,  post-war  problems  are  receiving 
active  consideration.  In  May  1918,  the  Italian 
Government  established  a  central  and  two  auxiliary 
commissions,  the  first  of  the  subcommissions  to  deal 
with  administrative,  judicial,  and  social  questions, 
and  the  second  to  study  industrial,  commercial,  and 

»  Com.  Rept.,  June  6,  1918,  p.  897;  O.  B.,  Jan.  15,  1918,  p.  8;  Bus. 
Dig.,  Feb.  13,  1918,  p.  221. 

*  Com.  Rept.,  June  6,  1918,  p.  898. 


IN  FOREIGN   COUNTRIES  271 

agricultural  problems.  The  plan  was  to  divide  the 
auxiliary  commissions  into  sections  to  be  determined 
by  the  president  of  the  cabinet,  who,  with  the  chair- 
men of  the  commissions  and  the  directors  of  the 
groups,  will  constitute  the  central  commission. 
Officials  of  the  civil  service,  and  others  peculiarly 
fitted  to  discuss  specific  questions  may  be  invited 
to  sit  in  counsel  with  the  subcommittees.  It  is 
expected  that  the  central  commission  will  draft  the 
general  program  to  be  followed,  apportion  the  ques- 
tions to  be  studied  among  the  subcommittees,  and 
on  the  basis  of  their  recommendations  draw  up  a 
report  for  the  Parliament.^ 

In  the  case  of  Spain,  the  Minister  of  Public 
Works  has  recently  outlined  an  extensive  program 
for  the  economic  reconstruction  of  that  country. 
The  plan  includes  the  nationalization  of  trunk  rail- 
ways, and  changes  in  legislation  in  regard  to  second- 
ary railroad  systems ;  regulations  of  concessions 
granted  for  the  exploitation  of  the  large  water- 
courses ;  extensive  budgeting  for  public  works ;  a 
modification  of  regulations  in  regard  to  mining; 
the  creation  of  an  agricultural  credit  organization ; 
and  the  "creation  of  an  organization  which  will 
forthwith  prepare  the  economic  life  of  Spain  both 
for  the  period  of  transition  between  war  and  peace 
and  for  the  lines  of  policy  which  have  to  be  fol- 
lowed after  the  war."  ^  It  is  the  intention  of  the 
Government  to  take  a  more  active  part  in  the  eco- 

1  Com.  Rept.,  June  6,  1918,  p.  902;  O.  B..  June  11,  1918,  p.  16. 

2  Com.  Rept.,  Aug.  28,  1918,  p.  788. 


272        PROBLEMS  OF  RECONSTRUCTION 

nomic  life  of  the  country  than  ever  before.  The  Min- 
ister maintained  that  all  his  projects  tend  in  the  di- 
rection of  increased  intervention  by  the  State  and  of 
an  economic  nationalism  which  he  considered  to  be 
absolutely  indispensable  in  order  that  Spain,  at  the 
end  of  the  war,  may  not  be  economically  invaded 
and  financially  despoiled.  According  to  the  proposed 
policy,  concessions  both  for  mines  and  water  power 
which  the  State  may  grant  must  be  limited  to  pri- 
vate individuals  and  to  enterprises  which  are  dom- 
iciled in  Spain.  The  purpose  is  not  so  much  to  re- 
ject the  aid  of  foreign  capital  in  the  exploitation  of 
the  resources  of  the  country  as  to  render  foreign 
assistance  unnecessary.  At  any  event,  it  is  the 
opinion  of  the  Minister  that  where  foreign  capital 
is  invested  in  the  country  the  enterprises  should  be 
strictly  regulated  by  Spanish  laws,  and  that  the  bus- 
iness developed  in  Spain  should  be  subject  to  na- 
tional administrative  and  fiscal  legislation.^ 

Other  countries  have  planned  a  more  or  less  ex- 
tensive system  of  reconstruction.  In  the  case  of 
belligerents,  these  often  include  measures  for  the 
restoration  of  soldiers  to  occupations,  provisions  for 
raw  materials  and  credit,  and  plans  for  adequate 
housing  of  the  laboring  population.  In  many  in- 
stances there  is  a  strong  movement  in  favor  of  im- 
proved methods  of  education  and  for  state  aid  for 
scientific  and  technical  research.  Throughout  the 
world,  where  countries  have  begun  to  plan  for  the 
future,  an  extensive  program  of  foreign  trade  de- 

1  Com.  Rept.,  Aug.  28,  1918,  p.  789. 


IN  FOREIGN  COUNTRIES  273 

velopment  is  in  contemplation.^  In  Holland,  or- 
ganizations have  recently  been  created  for  the 
study  of  both  concrete  and  general  trade  problems. 
The  Commission  for  Economic  Politics,  installed  by 
the  Minister  of  Agriculture,  Industry,  and  Com- 
merce is  to  investigate  various  economic  questions. 
The  specific  task  of  studying  commercial  develop- 
ment is  in  the  hands  of  an  Advisory  Commission  for 
the  Foreign  Economic  Information  Service,  cre- 
ated on  July  2,  1918,  by  the  Minister  of  Foreign 
Affairs.  The  Commission  is  to  act  as  an  advisory 
body  to  the  Minister  and  is  specifically  charged  with 
the  duty  of  obtaining  the  maximum  benefits  from  the 
Netherlands  Foreign  Service.^  Thus  far,  the  plans 
of  the  Commission  make  provisions  for  the  estab- 
lishment in  foreign  countries  of  chief  consular  of- 
ficers who  will  be  afforded  facilities  for  traveling 
about  their  districts  in  order  to  acquaint  themselves 
with  consular  personnel  and  general  economic  con- 
ditions, for  training  of  consular  officers,  and  for  the 
creation  of  a  new  kind  of  consul,  —  a  so-called  gen- 
eral consular  officer,  or  consul  general  at  large ;  the 
plans  also  make  provision  for  special  experts,  or 
technical  advisers,  to  be  attached  to  the  various 
legations  for  assistance  in  particular  cases.' 

We  have  already  referred  to  the  commercial  ex- 
pansion of  Japan  since  the  beginning  of  the  war. 
A  new  foreign  bureau  has  recently  been  formed  by 
the  commercial  interests  of  the  city  of  Yokohama. 

1  Com.  Rept.,  Jan.  5,  1917,  p.  54;   April  3,  1918,  p.  38. 
»  Ibid.,  Sept.  3,  1918,  p.  853.  ^  Ibid. 

T 


274        PROBLEMS  OF  RECONSTRUCTION 

This  organization  is  said  to  be  the  forerunner  of  a 
great  commercial  museum  to  be  built  in  that  city 
in  the  near  future.  An  extensive  campaign  for  trade 
development  is  in  prospect.  There  is  to  be  an  in- 
vestigation of  the  foreign  trade  of  Japan,  a  collec- 
tion and  exhibition  of  commercial  products  for  the 
purpose  of  familiarizing  home  producers  with  the 
customs,  tastes,  and  manners  of  the  people  with 
whom  Japanese  merchants  propose  to  deal,  and 
occasional  exhibits  for  the  study  of  foreign  mer- 
chandise.^ The  Yokohama  Chamber  of  Commerce 
has  recently  urged  the  Government  to  send  abroad 
technical  and  industrial  commissioners  to  study 
economic  conditions  in  many  of  the  important 
manufacturing  centers  of  the  world. 

Of  all  the  countries,  England  has  probably  in- 
augurated the  most  thoroughgoing  plans  for  recon- 
struction, and  we  may  therefore  look  to  this  country 
for  the  most  instructive  examples.  In  Septem- 
ber 1918,  Hon.  Christopher  Addison,  Minister 
of  Reconstruction,  stated  as  the  fundamental  aims 
of  the  work  "better  cooperation  between  capital 
and  labor ;  better  conditions  of  life ;  better  train- 
ing; and  better  industrial  methods."  ^  This  is  only 
a  meager  summary  of  the  plan,  and  it  gives  no  idea 
of  the  machinery  by  means  of  which  these  ends  are 
to  be  obtained.  Such  machinery,  however,  is  in 
existence,  and  we  shall  study  it  shortly.  As  an  in- 
troduction to  the  study  of  British  plans  we  may  point 

1  Cora.  Rept.,  Aug.  21,  1918,  pp.  700-701. 
"  Ibid.,  Nov.  16,  1918,  pp.  652-653. 


IN  FOREIGN  COUNTRIES  275 

out  the  estimate  of  the  Minister  of  Reconstruction 
of  the  effect  of  the  war  on  the  British  frame  of 
mind.  Thus,  said  the  Minister,  the  war  "has  re- 
moved some  of  our  narrowness  of  vision ;  it  has 
made  us  reahze  that  a  good  many  of  our  class  prej- 
udices are  wholly  artificial  and  harmful.  It  has  also 
shown  very  clearly  that  this  country  has  never  made 
as  much  use  as  it  ought  to  have  made  of  brains."  ^ 
It  was  the  opinion  of  the  Minister  that  hereafter 
industrial  progress  will  demand  a  closer  relation  be- 
tween the  factory  and  the  laboratory,  that  the 
number  of  trained  experts  ought  to  be  increased, 
and  that  there  had  been  too  much  "stand-offish- 
ness" between  the  business  of  the  community  and 
the  educational  authorities.  He  recommended 
changes  in  all  these  respects.  In  a  measure,  this 
indicates  the  spirit  of  the  reconstruction  movement 
in  England.  The  fundamental  principle  which  is  to 
form  the  basis  of  the  new  work  is  found  in  the  pro- 
posed cooperation  among  all  classes  interested  in 
production,  including  industrial  managers,  experts, 
educational  authorities,  capitalists,  and  laborers. 
The  new  order  which  is  to  be  evolved  out  of  the 
turmoil  of  the  war  is  to  be  based  on  a  thorough 
study  of  these  relations.  A  complete  survey  of 
prospective  industrial  conditions  is,  of  course,  es- 
sential for  any  reconstruction  plan  and  an  impor- 
tant part  of  the  work  of  the  committees  is  to  make 
this  survey. 

Since  the  English  post-war  plans  are  more  thor- 

1  Com.  Rept.,  Nov.  16,  1918,  pp.  652-653. 


276        PROBLEMS  OF  RECONSTRUCTION 

oughly  organized  than  any  of  those  that  have  come 
to  us,  it  is  profitable  to  study  them  in  some  detail. 
First,  we  may  present  the  outline  of  the  organi- 
zation. According  to  a  recent  announcement  of  the 
Minister  of  Reconstruction,  some  87  committees,  fall- 
ing into  15  groups,  have  been  appointed  to  deal  with  as 
many  general  phases  of  post-war  conditions.  The 
summary  given  below  indicates  the  scope  of  the  work  :  ^ 

(I).  Trade  development,  under  which  grouping  are 
five  committees  dealing  with  general  aspects,  and 
nine  dealing  with  specific  phases  of  the  situation. 

(II).    Finance,  with  two  committees. 

(III).    Raw  materials,  with  six  committees. 

(IV).  Coal  and  power,  with  two  committees  and 
four  subcommittees. 

(V).    Intelligence,  with  two  committees. 

(VI).  Scientific  and  industrial  research,  with  two 
research  boards,  five  standing  committees,  seven  re- 
search committees,  four  inquiry  committees,  and 
three  provisional  organization  committees. 

(VII).  Demobilization  and  disposal  of  stores, 
with  eight  committees. 

(VIII).  Labor  and  employment,  with  two  com- 
mittees. 

(IX).  Agriculture  and  forestry,  with  four  com- 
mittees. 

(X).    Public  administration,  with  six  committees. 

(XI).    Housing,  with  four  committees. 

(XII).  Education,  with  eight  committees  and 
commissions. 

1  Com.  Rept.,  March  6,  1918,  p.  854. 


IN  FOREIGN  COUNTRIES  277 

(XIII).   Aliens,  with  two  committees. 

(XIV).    Legal,  with  three  committees. 

(XV).    Miscellaneous,  with  three  committees. 

It  is  possible  to  give  in  greater  detail  the  work 
prescribed  for  some  of  the  leading  committees. 
Within  the  Trade  Development  group  are  the  com- 
mittees on  Commercial  and  Industrial  Policy,  Bel- 
gian Trade,  Trade  Relations  after  the  War,  Chem- 
ical Trades,  Engineering  Trades,  and  the  Industrial 
Development  Commission  which  is  studying  eco- 
nomic problems  of  India,  and  the  Dominions  Royal 
Commission.  The  last  named  body  is  charged  with 
the  task  of  reporting  on  (a)  the  natural  resources 
of  the  five  self-governing  dominions  and  the  best 
means  of  developing  these  resources ;  (b)  the  trade 
of  these  parts  of  the  Empire  with  the  United  King- 
dom, with  each  other,  and  with  the  rest  of  the  world ; 
(c)  their  requirements,  and  those  of  the  United 
Kingdom  in  the  matter  of  food  and  raw  materials, 
together  with  the  available  sources  of  supply. 
This  body  is  to  make  recommendations  consistent 
with  the  existing  fiscal  policy  by  which  the  trade  of 
the  dominions  with  each  other  and  with  the  United 
Kingdom  may  be  improved  and  extended.  The 
commission  which  is  studying  industrial  affairs  in 
India  has  two  important  tasks :  the  first  is  to  learn 
the  new  possibilities  for  the  investment  of  Indian 
capital  in  trade  and  industry ;  and  the  second,  to 
ascertain  whether  the  Government  can  give  direct 
encouragement  in  any  form  to  industry. 

The  purposes   of  the  Belgian  Trade  Committee 


£78        PROBLEMS  OF  RECONSTRUCTION 

are  to  recommend  methods  of  improving  trade  re- 
lations between  Belgium  and  the  United  King- 
dom. The  function  of  the  Committee  on  Trade  Re- 
lations after  the  War  is  to  "investigate  the  general 
questions  of  trade  relations  after  the  war  with  a 
view  to  the  successful  promotion  of  British  trade, 
and  also  with  the  object  of  devising  measures  for 
the  prevention  of  effective  resumption  of  Ger- 
many's policy  of  peaceful  penetration." 

Among  the  tasks  of  the  committees  in  the  Fi- 
nancial Group  is  the  study  of  the  financial  resources 
of  the  United  Kingdom  particularly  for  the  purpose 
of  ascertaining  whether  such  facilities  "for  trade  by 
means  of  existing  banking  and  other  financial  in- 
stitutions will  be  adequate  to  meet  the  needs  of 
British  industry  during  the  period  immediately  fol- 
lowing the  termination  of  the  war,  and,  if  not,  by 
what  emergency  arrangements  they  should  be  sup- 
plemented, regard  being  had  in  particular  to  the 
special  assistance  which  may  be  necessary  (a)  to 
facilitate  the  conversion  of  works  and  factories  now 
engaged  upon  war  work  to  normal  production ;  (6) 
to  meet  the  exceptional  demands  for  raw  materials 
arising  from  the  depletion  of  stocks."  ^  Another 
committee  in  this  group  is  to  recommend  methods 
of  liquidating  debts  arising  out  of  the  administra- 
tion of  enemy  property.^ 

The  group  of  committees  charged  with  the  task 
of  studying  the  raw  material  situation  is  performing 
a  most  important  function,  for  the  prompt  and  or- 

1  Com.  Rept.,  March  6,  1918,  p.  854.  « Ibid. 


IN   FOREIGN  COUNTRIES  279 

derly  reestablishment  of  industry  will  depend  as 
much  on  supplies  of  materials  as  upon  financial 
facilities.  Special  bodies  are  investigating  the  ques- 
tions of  cotton  growing  within  the  Empire,  the  sup- 
ply of  edible  and  oil-producing  nuts  and  seeds, 
and  the  supply  of  nitrogen  products ;  another  com- 
mittee in  this  group  is  investigating  the  general 
question  of  supplies.  Some  of  its  duties  are  to  re- 
port upon  (a)  the  nature  and  amount  of  supplies  of 
materials  and  foodstuffs  which,  in  the  committee's 
opinion,  will  be  required  by  the  United  Kingdom 
during  the  period  which  will  elapse  between  the 
termination  of  the  war  and  the  restoration  of  nor- 
mal conditions  of  trade ;  (6)  the  probable  require- 
ments of  India,  the  dominions,  and  the  Crown  Col- 
onies for  such  supplies  at  the  close  of  hostilities ;  (c) 
the  probable  requirements  of  belligerents  and  neu- 
trals for  such  supplies ;  (d)  the  sources  from  which, 
and  the  conditions  under  which,  such  supplies  can 
be  obtained  and  transported,  and,  in  particular,  the 
extent  to  which  they  might  be  obtained  from  the 
United  Kingdom,  or  within  the  Empire,  or  from  neu- 
tral countries ;  {e)  whether  it  will  be  necessary  to 
exercise  government  control  after  the  war,  and  if 
so,  the  character  of  that  control.^  The  list  of  duties 
assigned  to  other  committees  covers  an  extensive 
range  of  inquiries  designed  to  reveal  the  industrial 
conditions  the  country  will  have  to  face.  The  in- 
vestigations will  give  the  information  necessary  to 
serve  as  a  basis  for  the  reconstruction  program, 

1  Com.  Rept.,  March  6,  1918,  p.  856. 


280        PROBLEMS  OF  RECONSTRUCTION 

We  should  miss  entirely  the  spirit  of  English  re- 
construction if  we  did  not  understand  the  emphasis 
laid  on  education  and  industrial  and  scientific  re- 
search. These  are  corner  stones  in  the  new  indus- 
trial and  social  structure.  The  study  of  the  educa- 
tional system  is  in  the  interest  both  of  liberal 
education  and  of  training  for  industry ;  the  purpose 
is  to  provide  the  student  with  the  equipment  for 
better  social  living  and  for  more  efficient  production. 
Thus,  the  work  of  the  committees  covers  practically 
the  whole  range  of  education.  The  investigations 
include  questions  of  adult  education,  the  training  of 
children  who  have  been  abnormally  employed  dur- 
ing the  war;  they  include  a  study  of  the  methods 
of  teaching  languages  and  sciences ;  the  question  of 
teachers'  salaries  is  also  made  the  object  of  special 
investigation ;  one  of  the  aims  is  to  learn  the  causes 
of  the  differences  in  rates  of  pay  in  respect  to  local- 
ities, duties,  qualifications,  sex,  or  any  other  con- 
sideration that  may  have  a  bearing  on  the  question.^ 

In  the  case  of  research,  the  work  is  in  the  hands  of 
upwards  of  twenty  committees.  In  some  instances, 
these  bodies  only  survey  the  field  for  the  purpose  of 
giving  advice  as  to  the  direction  in  which  investi- 
gations are  most  likely  to  prove  fruitful.  In  other 
cases  their  duty  is  to  direct  the  work.  The  leading 
fields  covered  by  the  research  bodies  are  fuel,  food, 
building  materials,  cements  for  lenses,  tungsten, 
lubricants,  and  the  electrical,  cotton,  woolen,  and 
worsted    industries.     The    Cold    Storage    Research 

1  Com.  Rept.,  March  6,  1918,  pp.  857,  861. 


IN  FOREIGN   COUNTRIES  281 

Board  was  appointed  to  organize  and  control  inves- 
I  ligations  of  problems  related  to  the  preservation  of 
foodstuffs.  The  Standing  Committee  on  Engineer- 
ing, Metallurgy,  Mining,  and  Glass  and  Optical  In- 
struments is  to  act  in  an  advisory  capacity  in  ref- 
erence to  research  in  the  industries  suggested  by  the 
title  of  the  committee.  In  the  case  of  cotton,  wool- 
ens, and  worsteds,  the  committees  are  only  provi- 
sional ;  their  particular  duty  is  to  organize  research 
associations  for  each  of  these  industries.^ 

Demobilization  problems  are  among  the  first  that 
must  be  solved.  Men  must  be  restored  to  industry 
in  an  orderly  way,  and  war  materials  must  be  dis- 
posed of.  The  Government  now  possesses  hundreds 
of  millions  of  dollars*  worth  of  materials  in  the  form 
of  arms,  munitions,  supplies,  and  scrap  which  must 
be  located,  inventoried,  and  stored  until  they  can 
be  disposed  of.  A  particularly  difficult  problem  will 
arise  in  connection  with  the  future  employment  of 
men  now  engaged  in  the  army,  in  government  offices, 
and  in  the  war  industries.  The  future  industrial 
peace  depends  in  a  large  measure  upon  the  success 
with  which  these  problems  are  solved.  Positions 
will  be  waiting  for  some;  for  others  jobs  must  be 
found.  Possibly,  men  who  are  needed  at  once  in 
industry  will  be  promptly  discharged  from  the 
army;  others  may  be  retained  under  arms  long 
enough  for  the  newly  established  peace  industries 
to  absorb  them.  This  phase  of  reconstruction  work 
is  in  the  hands  of  the  Demobilization  Coordination 

1  Com.  Rept.,  March  6,  1918,  p.  858. 


282        PROBLEMS  OF  RECONSTRUCTION 

Committee,  representing  the  Admiralty,  the  War 
Office,  and  the  Minister  of  Labor.  With  reference 
to  war  materials,  the  work  of  formulating  plans  for 
the  future  is  in  the  hands  of  the  Disposal  of  War 
Stores  Advisory  Board.  Its  duty  is  to  "expedite 
the  preparation  of  necessary  inventories  of  property 
and  goods  of  all  descriptions  held  by  the  Government 
departments,  and  to  consider  and  advise  upon  the 
disposal,  or  alternate  form  of  use,  of  any  property  or 
goods  which  have  or  may  become,  during  or  on  the 
termination  of  the  war,  surplus  to  the  requirements 
of  any  department  for  the  purposes  of  that  depart- 
ment." 1 

Some  of  the  committees  concerned  with  industry 
and  trade  have  rendered  partial  reports.  From  these 
it  is  clear  that  at  least  three  general  policies  will  be 
advocated,  namely,  the  utilization  of  the  principal 
industrial  gains  of  the  war,  the  promotion  of  a  larger 
measure  of  national  self-sufficiency  in  the  production 
both  of  raw  materials  and  manufactured  products, 
and  some  means  of  defense  against  foreign  competi- 
tion during  the  reconstruction  period.  A  recent  re- 
port on  the  iron  and  steel  industry  distinguishes  the 
policy  for  the  years  immediately  following  the  con- 
clusion of  peace  from  that  for  the  period  when  in- 
dustry shall  have  become  firmly  settled.  The  com- 
mittee recommends,  during  the  reconstruction 
period,  the  prohibition  of  all  imports  of  manufac- 
tured or  semi-manufactured  products  of  iron  and 
steel  from  present  enemy  countries.     It  urges,  more- 

1  Com.  Rept.,  March  6,  1918,  p.  859. 


IN  FOREIGN  COUNTRIES  283 

over,  that  no  raw  materials  be  sent  to  present 
enemy  countries  from  British  dominions  or  colonies, 
and  that  enemy  countries  shall  not  be  supplied  from 
mineral  or  other  resources  under  British  control. 
Likewise,  with  reference  to  shipping,  the  committee 
urged  that  British  ships  shall  not  carry  raw  mate- 
rials or  manufactured  iron  and  steel  from  neutral 
ports  to  ports  in  present  enemy  countries,  or  to  neu- 
tral ports  for  ultimate  shipment  to  such  countries, 
and  it  advised  that  careful  consideration  should  be 
given  to  the  question  of  permitting  vessels  of  Eng- 
land's enemies  to  carry  goods  to  and  from  British 
ports  and  to  coal  in  any  of  the  British  stations.  If 
these  recommendations  are  carried  out,  the  post- 
war resurrection  of  the  German  iron  and  steel  trade 
will  encounter  almost  insurmountable  handicaps ; 
indeed,  her  domestic  industry  will  be  seriously  crip- 
pled, for  Germany  depends  on  British  possessions 
for  some  of  the  essential  materials  that  enter  into  the 
production  of  steel.  Restrictions  on  coaling  priv- 
ileges would  cripple  German  shipping  in  many  parts 
of  the  world. 

Looking  ahead  to  the  period  when  normal  condi- 
tions shall  have  been  restored,  the  committee  rec- 
ommended that  an  "imperative  function  of  na- 
tional policy"  demanded  the  continued  develop- 
ment of  the  British  iron  and  steel  business  and  the 
rendering  of  the  Empire  as  independent  as  possible 
of  foreign  sources  of  supply.  A  number  of  measures 
were  suggested  as  remedies  for  "dumping."  It  was 
possible,  for  example,  to  initiate  legislation  like  that 


284        PROBLEMS  OF  RECONSTRUCTION 

of  Canada;  or  the  importation  of  iron  and  steel 
which  did  not  bear  a  clear  mark  of  origin  could  be 
prohibited.  Another  way  of  reaching  the  same  evil 
was  to  require  foreign  syndicates  to  obtain  a  license 
before  disposing  of  their  wares  in  England,  The 
terms  of  the  license,  of  course,  could  require  that 
products  should  not  be  sold  in  England  at  lower 
prices  than  in  the  home  country.  British  consuls 
abroad  could  be  depended  upon  to  provide  the  home 
department  with  the  information  needed  for  the 
administration  of  the  license  system.^ 

The  committee  representing  the  engineering  trades 
made  similar  recommendations.  In  order  to  facil- 
itate the  reestablishment  of  home  industry  after  the 
war,  the  committee  was  of  the  opinion  that  the  im- 
portation of  enemy  products  should  be  prohibited 
for  one  year,  except  under  license.  To  encourage 
trade  among  the  Allies  the  committee  suggested  cer- 
tain concessions  on  the  one  hand,  and  on  the  other 
additional  duties  on  the  products  of  enemy  coun- 
tries. Meanwhile,  it  was  urged  that  some  govern- 
ment department  should  be  assigned  the  task  of 
exercising  special  vigilance  over  manufactures  es- 
sential for  the  national  safety,  such  as  tungsten  and 
magnetos,  and  that  the  development  of  raw  mate- 
rials within  the  Empire  for  such  industries  should 
receive  special  government  support.^ 

In  the  case  of  the  electrical  trades,  a  committee 

1  Com.  Rept.,  July  29,  1918,  pp.  376-377 ;  British  Trade  after  the 
War,  Cd.  8275,  p.  38.  (In  Continuation  of  Parliamentary  Paper,  Cd. 
8181  of  1916.)  »Com.  Rept.,  July  29,  1918,  p.  377. 


EST  FOREIGN  COUNTRIES  285 

having  this  study  in  hand  took  the  point  of  view 
that  the  importation  of  enemy  products  should  be 
prohibited  for  three  years  after  the  conclusion  of 
peace,  except  that  such  goods  might  be  brought  in 
under  license  after  one  year.  But  whatever  the 
source  of  imports,  duties  should  be  high  enough  to 
afford  British  manufacturers  adequate  protection. 
As  in  the  case  of  iron  and  steel,  measures  were 
urged  to  protect  the  home  industry  against  "dump- 
ing." Even  a  more  radical  policy  was  recommended 
to  prevent  the  interference  of  enemy  capitalists 
with  British  industries.  Thus,  any  concern  engaged 
in  electrical  or  related  industries,  if  controlled 
directly  or  indirectly  by  foreign  capital,  should  be 
prevented  from  continuing  trade  within  the  Empire 
unless  specially  authorized  to  operate  its  business, 
and  unless  its  constitution  was  made  public.  Ac- 
cording to  the  committee's  recommendation,  legis- 
lation should  provide  that  no  more  than  25  per  cent 
of  the  capital  of  any  electrical  or  related  enterprise 
should  be  held,  either  directly  or  indirectly,  by 
enemy  subscribers  or  agents.  All  goods  produced 
in  foreign  countries  by  companies  controlled  by 
enemy  capital,  or  under  enemy  direction,  were  to  be 
treated  as  enemy  products.^ 

In  connection  with  reconstruction  policies  there 
has  been  considerable  discussion  of  amendment  of 
the  Companies  Acts  of  Great  Britain  so  as  to  pre- 
vent interference  with  British  industries  through 
that   form   of   penetration    which    aims   at   control 

»  Com.  Rept.,  July  29,  1918,  p.  377. 


286        PROBLEMS  OF  RECONSTRUCTION 

through  share  ownership.  There  is  great  diflBculty, 
however,  in  devising  a  satisfactory  poHcy.  Any 
plan  for  the  regulation  of  investments  encounters 
the  objection  of  interfering  with  the  freedom  and 
openness  of  the  markets,  and  of  tending  to  deprive 
British  enterprises  of  the  support  of  foreign  capital. 
A  recent  report  to  the  Board  of  Trade  and  to  the 
Minister  of  Reconstruction  reviewed  the  possibilities 
of  legislation  and  came  to  the  conclusions  that,  with 
few  exceptions,  regulation  was  not  necessary.^ 
Witnesses  examined  by  the  committee  were  of  all 
shades  of  opinion,  from  those  who  favored  dis- 
closure of  enemy  holdings  to  those  who  emphatically 
opposed  such  proceedings.  The  committee  ad- 
vised that  one  of  the  great  difficulties  involved  in 
disclosure  was  that  shares  were  frequently  held  in 
trust,  and  that  it  would  be  practically  impossible  to 
require  sufficiently  frequent  declarations  to  take  care 
of  new  transfers  of  stock.  To  require  that  stock  be 
forfeited,  if  transferred  to  aliens,  appeared  to  the 
committee  to  be  neither  practicable  nor  advisable. 
As  to  the  suggestion  that  British  control  of  an  in- 
dustry was  assured  if  British  boards  of  directors 
were  maintained,  the  committee  replied  that  there 
was  no  way  of  guarding  against  alien  influence  over 
British  directors.  The  committee  suggested  as  a 
feasible  method  of  regulation  the  division  of  com- 
panies into  three  classes,  designated  A,  B,  and  C. 
Class  A  was  composed  of  enterprises  in  which  alien 
influence  had   no   significance.     In   such  industries 

1  Com.  Rept.,  Sept.  11,  1918,  p.  948. 


m  FOREIGN   COUNTRIES  287 

regulation  was  not  necessary.  Foreign  capital  for 
these  industries  probably  was  obtained  from  coun- 
tries against  whom  discriminatory  restrictions  should 
not  be  imposed.  Any  distinction  among  aliens  as 
to  nationality  would  be  undesirable,  since  such  a 
distinction  would  involve  the  disclosure  of  alien 
ownership,  and  this  would  both  require  complicated 
machinery  and  would  impede  investments  in  Brit- 
ish securities.  At  any  event,  should  it  be  deemed 
advisable  to  discriminate  against  aliens,  the  com- 
mittee thought  that  restrictions  should  be  limited 
to  a  very  brief  period  after  the  conclusion  of  peace. 

As  to  industries  included  in  Class  B,  —  compre- 
hending shipping  enterprises,  —  a  different  method 
of  treatment  was  urged.  Here,  the  committee  sug- 
gested the  amendment  of  the  Merchant  Shipping 
Act  of  1894  so  as  to  exclude  shipping  corporations 
whose  stock  was  owned  largely  by  aliens.  But  the 
total  exclusion  of  aliens  was  not  regarded  essential 
to  the  national  safety.  Possibly  a  limit  of  20  per 
cent  might  be  a  safe  proportion.  "If  this  limit  is 
to  be  adopted,"  said  the  committee,  "it  would  be 
necessary  to  provide  for  disclosure  of  nationality 
and  against  the  allotment  or  transfer  of  shares 
above  the  prescribed  limit.  Bearer  shares  must 
consequently  be  forbidden."  ^ 

In  the  case  of  Class  C,  covering  "key  industries," 
the  committee  recommended  special  supervision  by 
the  Board  of  Trade.  No  attempt  was  made  to  de- 
fine "key  industries,"  but  the  committee  thought 

»  Com.  Rept.,  Sept.  11,  1918,  p.  949. 


288        PROBLEMS  OF  RECONSTRUCTION 

that  it  was  possible  to  define  by  statute  in  general 
terms  the  characteristics  of  such  industries  and  leave 
the  application  in  particular  cases  to  a  body  like  the 
Board  of  Trade.  It  was  recommended  that  the 
Board  be  authorized  to  inquire  at  any  time  whether 
a  company  in  Class  A  was  carrying  on  a  "key  in- 
dustry," and  if  such  was  the  case,  this  enterprise 
should  be  listed  in  Class  C  and  become  subject  to 
all  the  regulations  of  that  class.  The  20  per  cent 
limit  suggested  for  the  shipping  industry  was  also 
recommended  for  Class  C. 

From  the  point  of  view  of  general  commercial 
policy,  English  opinion  is  undergoing  change.  Sev- 
eral important  conditions  are  responsible  for  this ; 
among  the  causes  we  may  name  the  desire  to  carry 
out  some  of  the  leading  provisions  of  the  Paris 
Economic  Pact,  to  foster  closer  economic  relations 
with  different  parts  of  the  Empire,  and  the  need  of 
obtaining  more  revenue  in  the  least  burdensome  way 
to  meet  the  huge  war  debt.  The  general  trend  of 
inquiries  with  reference  to  the  future  of  British  trade 
may  be  obtained  from  the  following  questions  pro- 
posed for  the  consideration  of  the  Committee  on 
Commercial  and  Industrial  Policy.^  The  list  con- 
tained the  following  questions  :  (a)  What  industries 
are  essential  to  the  future  of  the  Empire,  and  what 
steps  should  be  taken  to  maintain  or  establish 
them?  (b)  What  steps  should  be  taken  to  re- 
cover home  and  foreign  trade  lost  during  the  war 
and  to  secure  new  markets?     (c)  To  what  extent, 

1  Com.  Rept.,  Nov.  2,  1918,  p.  458. 


EST  FOREIGN   COUNTRIES  289 

and  by  what  means,  can  the  resources  of  the  Em- 
pire be  developed?  (d)  To  what  extent,  and  by 
what  means,  can  the  sources  of  raw  materials  within 
the  Empire  be  prevented  from  falling  under  foreign 
control?  Some  of  the  resolutions  of  this  com- 
mittee indicate  that  the  post-war  policy  will  be 
characterized  by  special  efforts  to  increase  both  in 
England  and  in  the  Empire  the  supply  of  foodstuffs 
and  of  raw  materials,  that  some  form  of  the  prin- 
ciple of  preference  may  be  tried,  and  that  there 
may  be  introduced  a  wider  range  of  customs  duties 
both  as  fiscal  measures  and  as  a  basis  for  commercial 
treaties  with  neutral  and  allied  countries.  The 
question  of  preferential  tariffs  has  been  discussed 
on  a  former  page.^  It  is  evident  from  a  study  of 
the  various  reports  that  a  distinguishing  mark  of 
British  commercial  policy  will  be  a  new  spirit  of 
enterprise  which  will  manifest  itself  in  a  keener  ap- 
preciation of  foreign  market  conditions,  in  a  more 
thorough  study  of  foreign  markets,  and  in  improved 
machinery  for  trade  which  will  include  better  intel- 
ligence service,  improved  means  of  communica- 
tion and  transport,  and  the  development  of  some 
form  of  investment  banking  suitable  for  colonial  and 
foreign  exploitation.  Possibly  the  policy  will  in- 
clude government  assistance  in  some  form. 

The  reconstruction  policies  as  applied  to  labor 
have  been  fairly  well  worked  out.  One  of  the  fun- 
damental purposes  involved  in  the  plans  is  to  secure 
closer   cooperation   between   employers   and   work- 

1  Cf.  p.  262. 
U 


290       PROBLEMS  OF  RECONSTRUCTION 

men  with  the  object  of  preventing  labor  disturbances, 
securing  greater  productivity,  and  of  obtaining  the 
assistance  of  both  groups  in  solving  various  recon- 
struction problems.  For  example,  the  restoration 
to  peace  industries  of  soldiers,  and  of  workers  in 
war  industries,  can  be  accomplished  most  effectively 
through  organizations  in  which  employers  and 
workmen  cooperate.^  Possibly  there  is  a  sugges- 
tion in  this  of  democratic  control  over  industry; 
but  persons  in  England  who  use  this  phrase  warn 
us  to  be  cautious  of  its  meaning.  It  does  not  signify 
the  demand  of  workmen  for  participation  in  indus- 
trial management,  including  the  buying  of  raw 
materials,  selling  of  finished  products,  and  "all  the 
exercises  of  trained  judgment  and  experience  that 
are  brought  to  bear  by  business  men."  ^  Workmen 
are  willing  to  leave  these  problems  to  industrial 
managers.  But  what  is  desired  is  "control  over 
the  conditions  under  which  their  own  daily  work  is 
done.  It  is  a  demand  for  control  over  one  side,  but 
that  the  most  important  side,  because  it  is  th:; 
human  side  of  the  industrial  process."  ' 

The  plan  proposed  in  the  Whitley  report,  which 
has  been  accepted  as  a  part  of  the  Government's  re- 
construction program,  provides  for  the  creation  of 
joint  standing  industrial  councils  representing  em- 
ployers and  workmen.  The  report  outlines  the 
particular  functions  of  these  bodies.  One  of  the 
most  important  of  these  is  to  consider  "appropriate 

1  Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  March  1918,  pp.  81  ff. 
yibid.,  Aug.  1917,  pp.  137-138.  '  Ibid. 


m  FOREIGN  COUNTRIES  291 

matters  affecting  the  several  industries  and  par- 
ticularly the  establishment  of  closer  cooperation 
between  employers  and  employed."  Questions  re- 
lated to  demobilization  may  be  referred  to  these 
councils.  These  bodies  may  also  be  called  upon  to 
consider  the  problems  of  restoring  trade  union  rules 
and  customs  suspended  during  the  war.  Said  the 
report :  "While  this  does  not  mean  that  all  the  les- 
sons learned  during  the  war  should  be  ignored,  it 
does  mean  that  the  definite  cooperation  and  ac- 
quiescence by  both  employers  and  employed  must 
be  a  condition  of  any  setting  aside  of  these  guar- 
anties or  undertakings,  and  that,  if  new  arrange- 
ments are  to  be  reached,  in  themselves  more  satis- 
factory to  all  parties  but  not  in  strict  accordance 
with  the  guaranties,  they  must  be  the  joint  work 
of  employers  and  employed."  ^ 

The  Whitley  plan  looks  forward  to  a  thorough 
organization  of  the  labor  forces  of  the  nation,  taking 
into  account  shop,  local,  and  national  groups.  Thus 
said  the  report:  "The  national  industrial  council 
should  not  be  regarded  as  complete  in  itself ;  what  is 
needed  is  a  triple  organization  —  in  the  workshops, 
the  districts,  and  nationally.  Moreover,  it  is  essen- 
tial that  the  organization  at  each  of  these  three 
stages  should  proceed  on  a  common  principle,  and 
that  the  greatest  measure  of  common  action  be- 
tween them  should  be  secured."  ^  District  councils, 
containing  representatives  of  trade  unions  and  em- 

1  U.  S.  Dept.  of  Labor,  Bui.  No.  237,  p.  231. 
»  Ibid.,  p.  230. 


292        PROBLEMS  OF  RECONSTRUCTION 

ployers,  are  to  be  created,  or  developed  out  of  exist- 
ing machinery,  for  the  purpose  of  negotiation  in 
the  various  trades ;  in  addition,  works  committees, 
also  containing  representatives  of  management  and 
workers,  are  to  be  created  in  particular  establish- 
ments to  work  in  close  cooperation  with  district  and 
national  organizations.  A  long  list  of  rather  gen- 
eral functions  is  submitted  as  the  sphere  of  activity 
of  the  national  councils.  This  list  contains  such 
duties  as  the  following  :  the  better  utilization  of  the 
practical  knowledge  and  experience  of  the  working 
people ;  means  for  securing  to  the  working  people  a 
greater  share  in  the  determination  of  the  conditions 
under  which  they  work;  the  settlement  of  general 
principles  governing  the  conditions  of  employment; 
the  establishment  of  regular  methods  of  negotiation 
for  issues  arising  between  employers  and  workmen ; 
means  of  insuring  to  the  working  people  the  great- 
est possible  security  of  earnings  and  employment. 
These  councils  are  also  to  consider  questions  of 
technical  education  and  training,  industrial  research, 
and  methods  of  improving  industrial  organization 
and  processes.^ 

The  authors  of  the  Whitley  report  urged  that 
present  circumstances  offered  a  great  opportunity 
for  securing  a  permanent  improvement  in  the  re- 
lations between  employers  and  employed,  and  that 
failure  to  make  use  of  this  opportunity  might  in- 
volve the  nation  in  grave  industrial  difficulties  after 
the  war.     "In  the  interest  of  the  community,"  said 

1  U.  S.  Dept.  of  Labor,  Bui.  No.  237,  p.  230. 


IN  FOREIGN  COUNTRIES  £93 

the  report,  "it  is  vital  that  after  the  war  the  co- 
operation of  all  classes,  established  during  the  war, 
should  continue,  and  more  especially  with  regard 
to  the  relations  between  employers  and  employed. 
For  securing  improvement  in  the  latter,  it  is  essen- 
tial that  any  proposals  put  forward  should  offer  to 
workpeople  the  means  of  attaining  improved  condi- 
tions of  employment  and  a  higher  standard  of  com- 
fort generally,  and  involve  the  enlistment  of  their 
activity  and  continuous  cooperation  in  the  pro- 
motion of  industry."  ^ 

Considerable  emphasis  is  laid  on  the  fact  that 
these  industrial  councils  are  to  play  a  "definite  and 
permanent  part  in  the  economic  life  of  the  country," 
and  that  "the  Government  feels  that  it  can  rely  on 
both  employers  and  workmen  to  cooperate  in  order 
to  make  that  part  a  worthy  one."  ^  It  is  stated 
that  the  Government  will  need  the  "united  and 
considered  opinion"  of  each  large  industry  in  the 
solution  of  such  problems  as  demobilization,  the 
resettlement  of  munitions  workers  in  civil  indus- 
tries, the  training  and  employment  of  disabled  sol- 
diers, and  in  the  settlement  of  apprenticeship  prob- 
lems. The  Minister  of  Labor  has  emphasized  the 
fact  that  this  program  does  not  introduce  a  new 
element  of  state  interference.  The  organizations 
are  autonomous.  The  plan  is  to  introduce  into 
industry  a  larger  degree  of  self-government  with 
the  hope  of  securing  greater  harmony  and  eflSciency. 

On   a   former  page   we  referred   to  the   German 

»  U.  S.  Dept.  of  Labor,  Bui.  No.  237.  p.  230.  i  Ibid. 


294        PROBLEMS  OF  RECONSTRUCTION 

organization  for  the  study  of  reconstruction  prob- 
lems. We  may  discuss  briefly  some  of  the  German 
plans.  As  in  other  European  countries,  a  matter  of 
first  consideration  is  the  demobilization  of  the  mili- 
tary and  war  industrial  forces.  According  to  a  prin- 
ciple established  by  the  Government,  demobilization 
must  be  effected  in  such  a  way  as  to  prevent  unem- 
ployment and  to  provide  labor  as  rapidly  as  pos- 
sible for  the  most  important  industries.  The  au- 
thorities have  laid  down  the  rule  that  no  man  is  to 
be  discharged  from  the  army  who  does  not  have  a 
job  in  prospect.  Those  who  cannot  obtain  posi- 
tions will  be  retained  for  a  time  in  the  army.  As  a 
rule,  the  older  classes  are  to  be  discharged  first,  and 
the  others  in  accordance  with  some  established  se- 
quence, depending  on  their  industrial,  or  profes- 
sional importance.  A  suggested  order  of  demobili- 
zation includes  :  (a)  leading  persons  in  the  field  of 
commerce,  industry,  navigation,  and  other  economic 
branches ;  (b)  heads  of  commercial,  industrial, 
and  agricultural  concerns,  and  officials  of  the  same ; 

(c)  independent  manufacturers  and  agriculturalists ; 

(d)  civil  servants  of  the  Statejs,  provinces,  and  com- 
munes, clergymen,  teachers,  and  employees  of  State 
and  private  railways ;  (e)  sailors  and  fishermen ; 
(/)  skilled  workers,  —  if  they  enter  immediately  into 
regular  employment ;  (g)  unskilled  workers  in  those 
callings  in  which  there  will  be  immediately  a  great 
demand  for  labor;  (h)  students  and  other  persons 
who,  at  the  outbreak  of  the  war,  were  preparing 
themselves  for  a  career;    and,  finally,  (i)  Germans 


IN  FOREIGN   COUNTRIES  295 

from    abroad.     Demobilization    of    the    navy    will 
proceed  in  the  same  order. ^ 

The  German  trade  unions  have  proposed  their 
own  plan  of  demobilization  which  should  be  ordered 
as  follows  :  "The  discharge  of  soldiers  from  military 
service  is  to  be  so  regulated  as  to  secure  the  im- 
mediate release  of  business  men,  technical  experts, 
foremen,  skilled  workmen,  and  administrative  of- 
ficials, who  are  urgently  required  for  the  restoration 
of  normal  economic  activity  and  for  the  resumption 
of  operation  of  indispensable  establishments.  In  re- 
leasing soldiers,  preference  should  be  given  to  those 
trained  for  an  occupation  in  which  there  is  a  partic- 
ularly strong  demand.  Discharge  in  general  should 
be  effected  with  as  little  delay  as  possible."  Pro- 
vision is  also  made  for  the  restoration  of  pre-war 
working  conditions  and  for  the  orderly  settlement 
of  disputes  between  employers  and  workmen.^ 

Much  of  this  program  depends  on  the  prompt 
reestablishment  of  manufactures  and  the  restoration 
of  foreign  commerce,  for  the  ability  of  industries  to 
absorb  workmen  will  be  measured  by  the  rapidity 
with  which  peace  conditions  are  restored.  But  the 
problem  of  the  restoration  of  industry  is  related  to 
the  supply  of  raw  materials,  and  since  many  of  these 
must  come  from  foreign  sources,  the  reconstruction 
program  must  include  considerations  of  foreign  trade ; 
thus  the  questions  are  raised  of  provision  of  cargo 
space,  financial  facilities,  the  rationing  of  a  limited 

»  Economic  Journal,  XXVII,  No.  106,  p.  284. 

» Mo.  Rev.  U.  S.  Bu.  Lab.  Sta.,  April  1918,  pp.  83  ff. 


296        PROBLEMS  OF  RECONSTRUCTION 

supply  of  foreign  materials  to  the  domestic  fac- 
tories, and  problems  of  general  trade  relations  with 
foreign  countries. 

Many  of  these  problems  have  been  worked  out 
by  the  various  sections  of  the  Imperial  Department 
of  Economics.  The  foundation  of  much  of  the 
after-war  organization  is  laid  on  the  consolidation 
of  some  of  the  great  industries  under  more  or  less 
central  control.^  Organizations  for  collective  pur- 
chase of  raw  materials  in  foreign  markets,  and  for 
collective  sale  of  German  products,  will  play  a  large 
part  in  the  reconstruction  program.  It  is  evident 
from  this  brief  outline  that,  at  least  during  the  re- 
construction period,  a  considerable  part  of  German 
industry  will  remain  under  government  control. 

It  is  hardly  necessary  to  point  out  by  way  of  sum- 
mary that  one  of  the  outstanding  facts  connected 
with  the  post-war  situation  in  European  countries 
is  that  careful  preparation  is  being  made  for  the 
restoration  of  the  future  industrial  establishment. 
Industry  is  not  to  be  allowed  to  drift  back  to  a  peace 
footing.  The  prospective  conditions  are  made  the 
object  of  special  study  for  the  purpose  of  devising 
methods  for  the  restoration  of  the  peace  order  with 
as  little  shock  as  possible.  The  study  is  under 
government  auspices,  and  undoubtedly  the  Euro- 
pean Governments  will  continue  to  exercise  a  certain 
measure  of  control  until  industry  is  firmly  estab- 
lished on  a  peace  basis.  How  much  control  will  be 
needed,  how  much  aid  the  State  must  give,  how  long 

1  Com.  Rept.,  June  29,  1918,  pp.  1226-1227. 


IN   FOREIGN   COUNTRIES  297 

the  control  will  last,  are  in  themselves  questions 
which  the  reconstruction  committees  are  supposed 
to  settle. 

Undoubtedly,  the  conditions  to  be  met  in  Euro- 
pean countries  are  much  more  serious  than  in  the 
United  States.  There,  the  industrial  disturbances 
have  been  much  greater ;  war  control  has  been  more 
penetrating,  and  the  results  have  been  more  firmly 
fixed  upon  the  countries.  War  debts  are  much 
greater  in  Europe  than  in  the  United  States ;  this 
fact  will  probably  affect  their  reconstruction  systems. 
Moreover,  the  dependence  on  the  outside  world 
both  for  raw  materials  and  for  markets  for  manu- 
factures is  much  greater  than  in  the  United  States. 
But  this  country  is  more  or  less  interested  in  all 
these  problems.  The  European  policies  will  have  a 
profound  effect  on  the  foreign  commercial  develop- 
ment of  this  country.  Their  methods  of  conserving 
raw  materials  under  their  control,  the  energy  with 
which  they  exploit  the  trade  of  distant  countries, 
the  freedom  with  which  they  permit  foreign  goods 
to  enter  their  borders,  their  policy  of  disposing  of 
their  goods  abroad,  and  their  methods  of  discharg- 
ing their  huge  debts  to  the  United  States,  are  all 
questions  in  which  our  merchants  and  manufacturers 
are  interested. 

In  addition,  this  country  has  a  large  number  of 
domestic  problems  to  solve.  Such  questions  as  the 
following  must  be  met  promptly  after  the  conclu- 
sion of  peace :  the  dissolution  of  the  war  organi- 
zations ;  the  general  question  of  the  relation  of  the 


298        PROBLEMS  OF  RECONSTRUCTION 

State  to  industry ;  the  particular  issues  involved  in 
the  future  relation  of  our  Government  to  the  rail- 
roads, telegraph  lines,  and  to  shipping.  Indeed,  we 
should  be  studying  these  problems  now.  Finally, 
there  are  numerous  questions  of  smaller  importance 
which  can  best  be  solved  by  a  study  of  the  pro- 
spective industrial  conditions.  The  old  method  of 
hurried  investigation  by  congressional  committees 
will  hardly  meet  the  present  requirements.  A  more 
thorough  and  careful  study  is  demanded  than  can 
be  given  by  the  old  method.  The  old  policy  of  in- 
vestigation resulted  in  fragmentary  solutions.  What 
is  needed  now  is  a  comprehensive  plan  of  reconstruc- 
tion based  on  a  comprehensive  national  policy. 
Such  a  plan  can  come  only  from  a  body  which  is 
competent  to  make  a  thorough  study,  viewing  in- 
dustrial conditions  as  a  whole.  This  suggests  one 
more  task,  namely,  an  outline  of  the  reconstruction 
problems  of  the  United  States  and  an  indication  of 
the  methods  of  attack. 


CHAPTER  IX 

A    RECONSTRUCTION    PLAN     FOR     THE     UNITED 

STATES 

From  our  discussion  of  the  results  of  the  war  it  is 
clear  that  we  have  many  new  problems  to  solve. ^ 
The  most  obvious  are  those  connected  with  demobi- 
lization ;  but  there  are  many  others  which  are  apt  to 
escape  attention.  These  questions  arise  in  both  the 
foreign  and  domestic  field ;  they  involve  home  and 
foreign  policy.  Again,  some  problems  refer  largely 
to  particular  industries ;  some  to  the  broader  as- 
pects of  the  relation  of  industries  to  each  other,  and 
some  arise  out  of  the  relations  of  government  to  in- 
dustry. At  first  thought  these  seem  to  be  separate 
problems ;  but  they  are  not,  nor  should  they  be 
studied  as  such.  Each  bears  some  relation  to  the 
others,  and  usually  the  relation  is  very  intimate. 

No  one  can  deny,  for  example,  that  there  is  a 
close  connection  between  the  development  of  foreign 
trade  and  the  growth  of  domestic  industry,  and  as 
a  result,  between  home  and  foreign  industrial 
policy.  Every  important  instrument  which  facil- 
itates the  expansion  of  the  overseas  trade  stimulates 
to  some  extent  the  growi:h  of  industry  within  the 
country.     Improved  methods  of  foreign  commercial 

1  Cf.  Chap.  VII. 
299 


SOO        PROBLEMS  OF  RECONSTRUCTION 

organization,  better  systems  of  communication,  the 
development  of  ocean  shipping,  improvement  of  the 
foreign  trade  intelHgence  service,  and  the  expansion 
of  banking  facilities,  in  the  first  instance,  seem  to  be 
of  importance  chiefly  for  the  development  of  the  ex- 
ternal trade.  But  a  moment's  thought  will  show 
that  all  these  facilities  affect  profoundly  the  pros- 
perity of  home  industries.  The  growth  of  foreign 
markets  for  raw  and  finished  products  increases  the 
demand  for  the  country's  goods  and  gives  a  great 
stimulus  to  domestic  industries.  It  has  been  charged 
that  the  farmers  of  the  United  States  have  shown 
little  interest  in  the  development  of  an  ocean  marine ; 
but  if  merchant  shipping  under  American  control  en- 
larges the  markets  for  wheat,  flour,  pork,  lard,  bacon, 
boots  and  shoes,  cotton  and  cotton  goods,  it  is 
clearly  to  the  interest  of  farmers  to  see  that  the 
country  is  amply  provided  with  an  American  owned 
merchant  marine. 

While,  on  the  one  hand,  the  growth  of  the  ex- 
port business  stimulates  home  industries,  an  enlarge- 
ment of  the  import  trade,  on  the  other  hand,  works 
to  the  same  end.  Imported  raw  materials  are  re- 
quired for  the  founding  and  growth  of  many  indus- 
tries ;  finished  products  brought  in  from  abroad 
afford  business  for  all  grades  of  merchants ;  the 
ability  of  foreigners  to  sell  in  our  markets  increases 
their  power  of  purchase.  Thus,  a  wholesome  ex- 
pansion of  the  facilities  for  foreign  trade  brings 
benefits  promptly  to  domestic  farmers,  manufac- 
turers, transportation  agencies,  and  merchants.     In 


RECONSTRUCTION  FOR  UNITED  STATES    301 

framing  an  industrial  policy  for  the  country,  there- 
fore, we  cannot  ignore  the  fact  that,  after  all,  these 
separate  elements  are  but  factors  in  the  complete 
industrial  life  of  the  nation.  If  it  were  our  purpose 
to  develop  this  argument  at  length,  we  could  pre- 
sent splendid  illustrations  from  the  development  of 
poorer  and  more  backward  countries  to  show  the 
enormous  benefits  they  derive  from  their  ability  to 
market  abroad  their  raw  and  partly  finished  com- 
modities, and  to  indicate  that  their  ability  to  pur- 
chase from  countries  beyond  their  borders  rests 
largely  on  this  stimulus.  The  dependence  of  many 
of  our  own  industries  on  foreign  trade  could  also  be 
shown.  But  our  purpose  is  only  to  expound  the 
fact  that  industries  of  every  description,  foreign  and 
domestic,  are  interrelated,  and  that,  as  a  corollary, 
in  working  out  our  reconstruction  policy  we  must 
consider  the  whole  field  as  a  unit ;  otherwise  our 
solutions  will  be  fragmentary  and  incomplete. 

Another  important  idea  should  be  explained  in 
this  connection.  We  speak  of  extractive,  manu- 
facturing, and  commercial  industries,  of  farming, 
manufacturing,  transportation,  and  of  banking,  as 
if  these  groups  were  separate  and  distinct,  and  as  if 
our  national  policy  with  regard  to  one  were  of  no 
particular  interest  to  the  others.  This,  of  course,  is 
an  error.  These  many  groups  only  represent  stages 
in  the  progress  of  commodities  to  the  household 
consumers.  On  its  way  to  the  market  any  particu- 
lar raw  material  has  to  be  financed,  transported  to 
some  factory  for  primary  production,  financed  again 


302        PROBLEMS  OF  RECONSTRUCTION 


in  its  movement  to  another  market,  transported  to 
some  factory  which  completes  the  manufacture, 
financed  again,  and  transported  to  wholesalers,  re- 
tailers, and  to  ultimate  consumers.  Banks,  rail- 
roads, telegraph  companies,  merchants,  and  factories 
intervene  at  every  stage  of  the  process.  It  follows 
from  this  that  industrial  changes  which  affect  one 
group  of  industries  affect  the  others.  Improved 
methods  of  extracting  products  from  soil,  forests, 
mines,  and  waters  affect  the  growth  of  commercial 
and  manufacturing  industries.  And  the  converse 
is  true.  Of  more  significance,  perhaps,  is  this  other 
side  of  the  process,  namely,  the  development  of  the 
commercial  industries.  Improvements  in  trans- 
portation and  banking,  and  the  growth  of  the 
credit  information  service,  have  exerted  a  profound 
influence  on  the  development  of  the  extractive  and 
manufacturing  industries.  All  modern  progress 
which  is  the  product  of  division  of  labor  in  some  of 
its  forms,  is  a  direct  result  of  improvement  in  bank- 
ing and  means  of  communication.  From  this  point 
of  view,  also,  we  come  again  to  the  conclusion  that, 
in  working  out  our  reconstruction  program  we  must 
take  the  comprehensive  view  of  the  situation.  All 
industries,  and  all  activities,  which  have  a  bearing 
on  the  problem  must  be  studied  in  their  relation  to 
the  industrial  development  of  the  country  as  a  whole. 
A  comprehensive  program  is  our  goal,  and  nothing 
short  of  this  will  afford  an  adequate  solution  of  our 
after- war  problems. 

Lest  there  should  be  some  mistake,  it  should  be 


RECONSTRUCTION  FOR  UNITED  STATES    303 

added  that  the  separation  of  our  problems  under 
the  captions  of  labor,  management,  conservation, 
and  social  questions  results  only  in  a  fragmentary 
solution.  Labor  and  capital  are  indispensable  ele- 
ments in  production  of  every  kind,  whether  farming, 
mining,  manufacturing,  or  what  not.  The  conser- 
vation problem  is  not  only  connected  with  physical 
resources,  but  with  human  elements  as  well.  The 
so-called  social  problems  are  found  in  every  nook 
and  cranny  of  industrial  life.  All  this  is  too  patent 
to  require  elucidation ;  yet  we  hesitate  about  ac- 
cepting the  conclusion  that  there  is  no  adequate 
solution  for  these  problems  which  works  with 
isolated  groups.  Thus,  it  should  be  emphasized 
that  no  fragmentary  solution  will  satisfy  our  needs. 
What  is  demanded  in  our  reconstruction  program  is 
machinery  not  only  for  the  study  of  particular  in- 
dustries, and  of  particular  activities,  but  also  of  the 
relations  of  industries  to  industries,  and  social  ac- 
tivities of  important  kinds  to  other  important  social 
activities.  This  is  fundamental.  Our  goal  is  the 
development  of  the  national  industrial  and  social 
interest;  to  obtain  this  the  industrial  life  of  the 
country  must  be  studied  both  as  to  its  parts,  and  as 
to  the  relation  of  the  parts  to  the  whole. 

The  reader  may  recall,  from  our  discussion  of 
reconstruction  measures  in  foreign  countries,  that 
something  like  this  method  is  being  employed 
abroad.^  The  functions  of  the  subordinate  bodies, 
that  is  of  the  subcommittees,  are  to   study   some 

1  Cf.  Chap.  VIII. 


304        PROBLEMS  OF  RECONSTRUCTION 

particular  phase  of  the  reconstruction  problem.  But 
the  central  organizations  will  probably  gather  in  all 
the  recommendations,  give  them  thorough  study, 
and  on  this  basis  suggest  a  plan  which  will  cover  the 
whole  industrial  and  social  field. 

We  may  check  with  this  principle  some  of  the 
proposed  methods  of  meeting  the  after-war  indus- 
trial situation.  A  number  of  methods  of  approach 
are  suggested.  One  is  to  let  the  situation  take  care 
of  itself.  Unless  the  statutes  are  extended,  many  of 
the  emergency  laws  will  lose  their  force  automatically 
shortly  after  the  conclusion  of  peace.  As  far  as 
control  goes,  the  country  would  then  be  in  sub- 
stantially the  same  position  as  in  April  1917.  Im- 
port and  export  regulations,  the  food  administra- 
tion, the  control  of  industries  through  the  machinery 
of  the  War  Industries  Board,  and  labor  control  would 
come  to  an  end.  The  country  would  be  left  to  what- 
ever shifts  it  could  make  to  get  back  to  a  peace 
basis.  Industrial  managers  would  proceed  as  of 
old ;  they  would  forecast  market  conditions  for  raw 
and  finished  products,  and  make  their  calculations 
accordingly.  Laborers  in  war  industries,  and  sol- 
diers discharged  from  the  service,  would  be  left 
largely  to  their  own  resources  to  find  occupations. 
The  only  plans  for  the  future  would  be  such  plans 
as  separate  industries,  or  perhaps  groups  of  indus- 
tries in  cooperation,  could  work  out  for  themselves. 
It  can  scarcely  be  said  that  the  success  of  this  pro- 
gram would  depend  on  the  wisdom  and  foresight  of 
the  managers,  for  many  conditions  would  arise  which 


RECONSTRUCTION  FOR  UNITED  STATES    305 

they  could  not  control.  Their  difficulties  would  be 
increased  by  the  unstable  and  uncertain  conditions 
after  the  war. 

A  brief  survey  of  the  probable  post-war  condi- 
tions will  make  this  clear.  Undoubtedly  there  will 
be  a  scramble  for  a  number  of  the  important  raw 
materials  and  for  many  finished  products.  Iron 
and  steel,  tin,  copper,  rubber,  lumber,  wool,  leather, 
paper,  and  possibly  cotton  and  the  cereals  will  be  in 
great  demand.  Domestic  producers  will  meet  in 
our  markets  foreign  competitors.  Many  of  the 
latter  will  probably  purchase,  not  as  individuals, 
but  combined  in  groups ;  ^  possibly  the  supplies  for 
some  of  the  European  countries  will  be  obtained 
through  a  single  purchasing  agency.^  Free  and  open 
markets,  as  Mr.  Hoover  has  pointed  out,  may  not 
exist  again  for  some  time.  Group  buying  by  for- 
eigners would  put  our  producers  at  a  serious  dis- 
advantage. Orders  on  such  a  large  scale  will  have 
a  most  potent  effect  on  disturbing  the  markets,  and 
under  such  conditions  rumors  and  reports  will  have 
a  greater  influence  on  prices  than  ever  before. 
These  fluctuations  in  the  prices  of  raw  materials 
would  impede  the  prompt  and  orderly  reestablish- 
ment  of  industries.  The  uncertain  conditions,  more- 
over, will  be  reflected  in  the  markets  for  finished 
products.  Prices  possibly  would  be  high,  because 
manufacturers  will  be  compelled  to  cover  their  pro- 
spective risks  by  unusual  additions  to  their  costs. 

This  drift  method  of  solution  would  preclude  col- 

»  Cf.  pp.  240  ff.  '  Cf.  pp.  242  ff. 

X 


306        PROBLEMS  OF  RECONSTRUCTION 

lective  action  on  the  part  of  our  own  producers.  It 
would  proceed  without  a  study  of  the  relation  of  in- 
dustries to  each  other,  and  without  a  knowledge  of 
the  industrial  situation  as  a  whole.  Railroad,  tele- 
graph, and  shipping  problems  would  receive  isolated 
treatment.  Thus,  the  defects  of  this  method  are 
that  it  is  planless,  it  proceeds  without  a  compre- 
hensive survey,  it  leaves  the  industries  of  the  coun- 
try to  be  afflicted  with  all  the  evils  arising  out  of 
uncertain  post-war  conditions,  and  it  leads  to  piece- 
meal solution  of  our  problems.  Under  this  policy, 
industrial  society  would  be  groping  in  the  dark. 

A  second  method  of  approaching  our  post-war 
problems  is  to  continue  the  emergency  control.  It 
might  be  urged  that  the  present  organization  could 
be  left  intact  with  each  division  working  in  the 
same  field  as  at  present.  It  might  be  said  that 
since  this  machinery  has  been  used  to  wind  up  war 
control  it  could  be  profitably  employed  to  do  the 
unwinding.  Undoubtedly  something  can  be  said 
in  favor  of  this  policy.  A  great  organization  is  in 
existence,  a  trained  staff  is  already  at  work,  and 
each  of  the  war  divisions  has  a  thorough  knowledge 
of  its  own  particular  field.  But,  on  the  other  hand, 
there  is  much  to  be  said  against  the  continuation  of 
the  present  war  organization  for  reconstruction  pur- 
poses. If  it  is  to  be  utilized,  some  new  elements 
must  be  added  and  some  of  the  present  elements 
dropped.  Unless  it  is  our  intention  to  continue 
import  and  export  control  there  would  be  little 
use   for  the  War  Trade  Board.     Much  of  the  or- 


RECONSTRUCTION  FOR  UNITED  STATES    307 

ganization  of  the  War  Industries  Board  could  not 
be  utilized  in  the  post-war  period  when  large  scale 
government  buying  comes  to  an  end.  On  the  other 
hand,  the  present  war  organization  contains  no 
machinery  for  handling  demobilization  problems, 
and  it  contains  no  facilities  for  making  the  compre- 
hensive survey  of  post-war  conditions.  This  is  a 
prerequisite  for  any  adequate  reconstruction  pro- 
gram. In  short,  if  the  present  organization  is  con- 
tinued, it  will  be  necessary  to  give  it  an  extensive 
overhauling.  Even  then,  this  reconstructed  war 
organization  could  not  perform  the  task  of  providing 
for  the  post-war  readjustments  as  well  as  some  new 
body  created  especially  for  that  purpose.  In  the  case 
of  a  new  reconstruction  organization,  attention  could 
be  concentrated  entirely  on  post-war  problems,  and 
personnel  could  be  selected  particularly  for  the  work. 
A  third  method,  therefore,  would  be  to  put  this 
work  in  the  hands  of  some  central  committee  or 
commission.  It  has  been  suggested  that  such  a  body 
should  be  constituted  of  members  of  the  Senate 
and  House  of  Representatives.  Thus,  according  to 
the  resolution  of  Senator  Owen,  introduced  on  Sep- 
tember 28,  the  committee  on  reorganization  should 
be  composed  of  six  senators  and  six  representatives, 
"fairly  representative  of  the  Democratic  and  Re- 
publican Parties,  to  be  nominated  by  the  party 
organizations  of  the  two  Houses  and  approved  by  the 
respective  Houses."  Service  on  the  committee  is 
to  terminate  if  the  member  ceases  to  be  a  member  of 
Congress.     Vacancies  are  to  be  jSlled  in  the  same 


308        PROBLEMS  OF  RECONSTRUCTION 

manner  as  the  original  selections  were  made.^  This 
committee  is  to  be  authorized  to  employ  such  clerical 
assistance  as  it  may  deem  necessary,  "including  the 
services  of  experts,  and  may,  as  subcommittee  or 
otherwise,  send  for  persons  or  papers,  administer 
oaths  .  .  .  and  report  such  hearings  as  may  be  had 
in  connection  with  any  subject  before  it."  ^  The 
resolution  contains  an  outline  of  the  work  the  com- 
mittee is  to  perform.  It  is  to  "make  an  immediate 
investigation  and  report  to  Congress  not  later  than 
January  1,  1919,  and  from  time  to  time  subsequently, 
with  suitable  recommendations  upon  the  reorgan- 
ization required  for  a  return  to  the  occupations  of 
peace  of  men  and  women,  capital  investments  and 
supplies  now  employed  in  war."  The  committee  is 
to  propose  ways  and  means  by  which  soldiers  and 
persons  engaged  in  war  industries  may  be  reem- 
ployed ;  it  is  to  recommend  methods  by  which 
"capital,  credit  and  labor  of  the  American  people 
after  the  war  may  be  actively  employed  in  produc- 
tion and  distribution  of  goods  at  home  and  abroad, 
the  supply  and  distribution  of  raw  materials  and 
food  products  arranged  to  this  end ;  to  report  upon 
the  construction  of  national  hard-surfaced  roads 
throughout  the  United  States ;  building  of  internal 
and  coastal  canals,  reclaiming  and  cultivating  of 
swamp  lands  and  arid  lands,  utilizing  water  powers, 
and  the  permanent  maintenance  of  the  American 
merchant  marine,  and  in  general   to   report   upon 

»  Cong.  Record,  Sept.  28,  1918,  p.  11799  (S.  Con.  Res.  22). 
« Ibid. 


RECONSTRUCTION  FOR  UNITED  STATES    309 

those   problems    arising  from  the  change  from  the 
activities  of  war  to  those  of  peace."  ^ 

In  short,  this  body  is  to  hold  hearings,  collect 
data,  receive  advice  from  various  industrial  inter- 
ests, and,  on  the  basis  of  its  findings,  make  recom- 
mendations for  legislation.  This  plan  reminds  us  of 
the  traditional  method  of  preparing  for  legislation 
in  the  United  States.  The  objection  to  it  is  not 
that  it  is  traditional,  but  that  it  fails  to  meet  the 
requirements  of  the  case.  The  situation  is  new. 
We  have  never  before  faced  problems  of  the  present 
magnitude.  The  prospective  conditions  demand 
careful  scrutiny  by  persons  who  are  specially  pre- 
pared for  the  work.  The  problems  are  too  numerous 
and  too  intricate  for  solution  in  the  customary  way 
by  congressional  committees.  As  we  have  urged 
above,  no  program  will  meet  post-war  emergencies 
which  is  not  based  on  a  comprehensive  view  and  on 
a  thorough  study  of  the  whole  industrial  field.  It 
is  not  unjust  to  a  committee,  such  as  the  one  pro- 
posed in  Senator  Owen's  resolution,  to  say  that  it 
could  not  deal  in  a  satisfactory  manner  with  prob- 
lems of  the  present  magnitude.  In  the  brief  period 
allotted  for  the  work,  —  it  is  to  make  a  preliminary 
report,  and  presumably  its  most  important  report, 
not  later  than  January  1,  1919,  —  this  committee 
could  not  possibly  study  even  the  most  important 
elements  of  the  problem,  nor  could  it  obtain  a  com- 
prehensive view  of  the  situation.  At  best,  its  in- 
vestigations would  be  hurried  and  superficial,  and 

^Cong.  Record,  Sept.  28,  1918,  p.  11799  (S.  Con.  Res.  22). 


SIO        PROBLEMS  OF  RECONSTRUCTION 

its  program  would  probably  favor  piecemeal  solu- 
tions. 

The  plan  is  faulty  in  another  respect.  During 
the  war  we  have  adopted  the  policy  of  closer  co- 
operation between  government  and  industry.^  The 
men  who  are  directing  the  industrial  program  of  the 
war  are,  as  a  rule,  leaders  of  industry  who  have  been 
called  upon  to  lend  their  services  to  the  Government 
for  the  period  of  the  war.  The  task  of  reorganizing 
for  peace  is  of  no  less  importance  than  that  of  or- 
ganizing for  war,  and  practical  business  talent  is  as 
urgently  demanded  for  this  task  as  for  the  one  now 
confronting  us.  It  would  be  a  step  backward  for 
Congress  to  revert  to  the  old  method  of  creating  an 
organization  composed  exclusively  of  its  own  mem- 
bers for  such  work.  The  war  policy  has  not  only 
secured  the  cooperation  of  business  men,  but  has 
given  the  Government  the  benefit  of  the  collective 
knowledge  of  persons  who  are  most  fitted  to  advise 
on  industrial  matters.  The  best  results  in  meeting 
after-war  problems  can  be  obtained  by  continuing 
and  developing  this  policy  of  cooperation.  Thus, 
the  leaders  in  industry  should  be  given  an  opportu- 
nity to  share  the  burdens  of  framing  our  recon- 
struction program. 

The  "Joint  Congressional  Committee  on  Recon- 
struction" proposed  by  Senator  Weeks  is  open  to 
the  same  objection  as  the  organization  presented  in 
the  Owen  resolution.  According  to  Senator  Weeks* 
plan,  the  committee  is  to  be  composed  of  six  sen- 
1  Cf.  p.  150. 


RECONSTRUCTION  FOR  UNITED  STATES    311 

ators  and  six  representatives  selected  as  follows : 
"Three  Senators  by  the  Democratic  Senatorial 
caucus,  three  Senators  by  the  Republican  Senatorial 
conference,  three  Representatives  in  Congress  by 
the  Democratic  House  caucus,  and  three  Represent- 
atives in  Congress  by  the  Republican  House  con- 
ference." ^  In  addition  to  other  objections,  there  is 
no  reason  why  this  body  should  be  so  carefully 
balanced  between  Republicans  and  Democrats.  Re- 
construction matters  are  principally  economic  af- 
fairs ;  the  requisite  for  membership  in  the  recon- 
struction organization  is  peculiar  fitness  for  this 
particular  undertaking.  It  cannot  be  too  strongly 
emphasized  that  the  post-war  readjustments  are 
among  the  greatest  problems  that  have  ever  been 
presented  for  solution ;  for  this  work  the  prime  con- 
sideration is  the  selection  of  properly  qualified  men. 
The  Weeks  resolution  outlines  at  great  length  the 
work  the  proposed  committee  is  to  perform.  The 
main  captions  are  the  following :  (a)  Problems  af- 
fecting labor ;  (6)  problems  affecting  capital  and 
credit ;  (c)  problems  affecting  public  utilities ;  (d) 
problems  resulting  from  the  demobilization  of  our 
industrial  and  military  forces ;  (e)  problems  affect- 
ing the  continuance  of  existing  industries  and  the 
establishment  of  new  industries ;  (/)  problems  re- 
lating to  agriculture ;  (g)  problems  affecting  the 
adequate  production  and  effective  distribution  of 
coal,  gasoline,  and  other  fuels ;  (h)  problems  related 
to   shipping,    including    shipyards,    and    especially 

1  Cong.  Record,  Sept.  27,  1918,  pp.  11760-11763  (S.  Con.  Res.  21). 


312        PROBLEMS  OF  RECONSTRUCTION" 

with  regard  to  the  sale,  continuance  of  ownership, 
or  leasing  of  both  yards  and  ships ;  (i)  housing  con- 
ditions and  the  disposition  of  houses  constructed  by 
the  Government  during  the  war ;  (J)  war  legislation 
now  on  the  statute  books,  with  reference  to  its  re- 
peal, extension,  or  amendment ;  (k)  all  matters 
arising  during  the  change  from  the  activities  of  war 
to  the  pursuits  of  peace. ^ 

The  mere  outline  of  the  work  for  the  proposed 
committee  indicates  that  the  subject  matter  refers 
chiefly  to  industry.  By  implication,  the  survey  of 
conditions,  and  the  recommendations  for  legislation, 
should  be  in  the  hands  of  persons  who  have  the  time 
and  talent  for  the  work. 

The  third  reconstruction  plan  thus  far  introduced 
into  Congress  comes  nearer  satisfying  the  needs  of 
the  case  than  the  proposals  of  Senators  Owen  and 
Weeks.  On  October  3,  Senator  Overman  intro- 
duced a  bill  providing  for  the  creation  of  a  Federal 
Commission  on  Reconstruction. ^  According  to  this 
measure,  the  commission  is  to  be  composed  of  five 
members  to  be  appointed  by  the  President  by  and 
with  the  advice  and  consent  of  the  Senate.  The 
proposed  duties  of  the  commission  are  "to  examine 
into  the  problems  and  conditions  that  are  arising 
out  of  the  war  and  that  may  arise  out  of  the  transi- 
tion of  the  economic,  industrial,  and  social  life  of  the 
Nation  from  the  state  of  war  to  the  state  of  peace ; 
and  with  a  view  of  meeting,  as  soon  as  possible,  such 

1  Cong.  Record,  Sept.  27,  1918,  pp.  11760-11763  (S.  Con.  Res.  21). 
*Ibid..  Oct.  3,  1918,  pp.  11974-11975  (S.  4968). 


RECONSTRUCTION  FOR  UNITED  STATES    313 

problems  and  conditions  before  their  solution  is 
actually  forced  on  the  Government,  the  commis- 
sion shall  report  to  Congress,  from  time  to  time  the 
results  of  such  investigations  with  recommendations 
for  new  and  additional  legislation."  ^  The  com- 
mission is  to  employ  economists,  investigators,  special 
experts,  and  others  to  assist  with  the  work. 

The  success  of  such  a  commission  would  depend 
largely  upon  its  composition.  Unfortunately,  ac- 
cording to  the  terms  of  the  bill,  the  proposed  body  is 
to  have  political  complexion,  for  it  is  required  that 
"not  more  than  three  of  the  commissioners  shall  be 
members  of  the  same  political  party."  ^  It  is  not 
necessary  to  repeat  our  former  argument  on  this 
score.  The  proposal,  however,  errs  in  another  re- 
spect. As  in  the  case  of  the  Owen  and  the  Weeks 
resolutions,  this  commission  is  to  be  a  government 
body.  It  will  not  make  use  of  the  cooperation  be- 
tween government  and  business  which  has  char- 
acterized much  of  our  war  activity.  An  organiza- 
tion, constituted  in  a  different  way,  which  would 
give  the  leaders  in  all  important  industrial  spheres  a 
voice  in  planning  for  reconstruction  would  accom- 
plish the  best  results. 

We  might  suggest,  therefore,  the  kind  of  or- 
ganization which  would  hold  out  the  greatest  promise 
of  success.  Two  distinct  tasks  must  be  met  by  any 
reconstruction  organization.  The  first  is  to  make 
the  survey  of  particular  fields  of  industrial  activity 
for  the  purpose  of  making  recommendations ;    and 

1  Cong.  Record,  Oct.  3.  1918.  pp.  11974-11975  (S.  4968).  'IMd. 


S14        PROBLEMS  OF  RECONSTRUCTION 

the  second  is  to  assemble  and  study  these  recom- 
mendations for  the  purpose  of  presenting  a  compre- 
hensive program.  The  latter  task  is  necessary  for 
the  construction  of  a  consistent  and  complete  pro- 
gram. The  work  must  be  correlated,  differences 
must  be  reconciled,  and  a  plan  proposed  which  will 
promote  economic  progress.  The  task  of  making 
the  survey,  and  of  framing  the  recommendations 
covering  particular  economic  activities,  is  too  great 
for  any  one  body  to  perform.  It  may  very  profit- 
ably be  left  in  the  hands  of  subcommittees,  both 
because  they  can  make  a  more  intensive  study,  and 
because  the  men  who  are  to  serve  on  these  com- 
mittees may  be  selected  on  account  of  their  knowl- 
edge of  the  field.  But  the  assembling  and  digesting 
of  the  proposals  of  the  subcommittees  is  the  work  of 
a  body  which  is  competent  to  survey  the  whole  field. 
Thus  the  reconstruction  organization  should  be  com- 
posed of  a  central  committee,  or  commission,  and  of 
subcommittees.  The  function  of  the  main  com- 
mittee should  be  to  outline  the  work,  to  direct  the 
investigations,  to  give  counsel  and  advice,  to  study 
the  findings  and  recommendations  of  these  com- 
mittees, and  to  submit  the  complete  reconstruction 
program.  The  subcommittees  will  have  a  number 
of  interests  in  common.  Many  of  them  will  be  in- 
terested in  methods  of  supplying  raw  materials,  in 
financial  facilities,  in  foreign  trade  policy,  in  ques- 
tions of  transportation,  in  labor  policy,  and  possibly 
in  problems   of  education  and  scientific  research.* 

»  Cf.  British  Trade  After  the  War  (London,  1916,  Cd.  8275),  passim. 


RECONSTRUCTION  FOR  UNITED  STATES    315 

One  of  the  important  functions  of  the  central  com- 
mittee should  be  to  secure  uniformity  in  the  reports ; 
close  supervision  will  be  required  if  this  consistency 
is  to  be  obtained. 

Since  there  are  many  fields  of  industrial  activity, 
the  number  of  subordinate  organizations  will  be  large. 
It  may  be  remembered  that,  in  the  case  of  the 
English  plan,  there  are  upwards  of  eighty  such  com- 
mittees.^ An  adequate  method  of  meeting  this 
part  of  the  program  would  be  to  constitute  these 
committees  according  to  the  plan  of  the  various 
organizations  connected  with  the  Council  of  Na- 
tional Defense,  or  of  the  subsequent  war  service 
committees.^  With  the  work  divided  in  this  man- 
ner, it  could  be  performed  thoroughly  and  quickly, 
and  by  men  who  are  properly  qualified.  A  partial 
list  of  the  subcommittees  would  include  the  fol- 
lowing :  coal,  fuel  oil,  iron  and  steel,  copper,  lead, 
zinc,  shipping,  railroads,  inland  water  transporta- 
tion, banking,  foreign  trade,  cotton  goods,  woolens, 
rubber,  building  trades,  labor,  conservation  of  nat- 
ural resources,  educational  and  industrial  research. 
It  would  probably  be  found  advisable  to  subdivide 
the  work  of  the  committees  working  in  the  partic- 
ular fields. 

The  central  committee  should  be  composed  of 
members  of  Congress  and  of  representative  business 

»  Cf.  supra,  p.  276. 

'  Cf.  First  Annual  Report  of  the  Council  of  National  Defense,  pp.  97 
ff. ;  Nation's  Business,  February  1918,  pp.  50-53;  cf.,  also,  p.  150  of 
this  volume. 


316        PROBLEMS  OF  RECONSTRUCTION 

men.  The  congressional  members  will  serve  as  the 
connecting  link  between  the  Government  and  busi- 
ness. Since  the  reconstruction  measures  are  to  be 
presented  to  Congress,  it  would  be  one  of  the  duties 
of  the  government  members  to  submit  the  pro- 
posals, together  with  reasons  and  findings.  The 
central  committee  might  be  composed  of  fifteen  per- 
sons of  whom  two  are  Senators  and  two  Representa- 
tives in  Congress.  The  other  eleven  members 
should  be  men  engaged  in  leading  industrial  ac- 
tivities; the  list  should  include  persons  with  broad 
knowledge  and  experience  in  banking,  commerce, 
transportation,  manufacture,  labor,  and  education. 

At  first  thought,  this  seems  to  be  a  compromise 
between  the  congressional  committee  and  the  gov- 
ernment commission  method  of  studying  industrial 
problems.  It  may  be  regarded  as  such ;  but  it  em- 
bodies the  advantages  of  both  methods  and  avoids 
the  disadvantages.  The  plan  is  recommended  by 
the  fact  that  it  would  secure  cooperation  with  the 
business  men  of  the  country;  moreover,  the  in- 
formation would  be  gathered  at  the  source  in  an 
orderly  way  by  men  who  are  in  contact  with  in- 
dustry; the  recommendations  would  embody  the 
advice  of  men  who  are  experienced  in  industrial  af- 
fairs. On  the  other  hand,  the  final  study  of  the 
reconstruction  program  would  be  in  the  hands  of  a 
committee  which  was  better  prepared  for  such  a 
task  than  a  committee  constituted  in  any  other 
way. 

The  first  task  of  the  central  reconstruction  organ- 


RECONSTRUCTION  FOR  UNITED  STATES    317 

ization  will  be  to  survey  the  field  for  the  purpose  of 
mapping  out  the  work  of  investigation  and  report. 
Many  questions  requiring  study  will  be  found  to 
overlap.  The  work  assigned  to  one  committee  will 
involve  that  given  to  another.  This  is  a  conse- 
quence of  the  interdependence  in  economic  life.  It 
will  thus  be  impossible  to  organize  the  fields  of 
study  so  that  each  investigating  body  can  go  its 
own  way  without  reference  to  the  work  of  other 
bodies.  To  give  several  examples :  The  com- 
mittees assigned  to  the  study  of  foreign  trade  will 
find  shortly  that  their  work  will  carry  them  into  the 
field  of  domestic  industry.  When  they  submit 
their  reports,  it  will  be  necessary  to  deal  not  only 
with  questions  of  foreign  commerce,  but  also  with 
many  features  of  domestic  industry.  Again,  when 
various  committees  take  up  the  study  of  demobi- 
lization they  will  discover  at  once  that  this  is  not 
wholly  a  government  problem,  but  that  the  policy 
followed  in  discharging  men  from  the  service,  and  in 
the  disposal  of  war  materials,  will  have  a  notable 
effect  on  home  industries.  That  the  reconstruction 
problems  overlap  is  not  a  serious  diflSculty.  By 
conference  among  the  committees  the  contiguous 
problems  may  be  studied  and  recommendations  can 
be  made  consistent.  Each  committee,  therefore, 
may  concentrate  on  some  definite  field  and  confer 
with  other  committees  where  the  problems  are  in- 
terlocking. Indeed,  this  is  the  only  way  to  prepare 
a  report  which  is  to  contain  a  comprehensive  plan 
for  industrial  reorganization. 


818        PROBLEMS  OF  RECONSTRUCTION 

The  reconstruction  problems  may  be  brought  to- 
gether in  a  few  groups.  The  first  problems  requir- 
ing solution  are  related  to  demobilization.  These 
groups  will  present  two  phases :  the  first  involves 
questions  in  which  the  Government  is  primarily  in- 
terested, including  (a)  the  restoration  of  men  in  the 
service  to  normal  industrial  activities ;  (6)  the  dis- 
posal of  materials  and  stores,  and  (c)  the  reorgani- 
zation of  the  federal  executive  departments  which 
have  been  distorted  by  the  war  work.  The  other 
aspect  of  demobilization  is  primarily  a  problem  for 
industrial  managers.  It  includes  such  questions  as 
(a)  financial  facilities  with  which  to  effect  the  post- 
war reorganization ;  (b)  the  provision  of  raw  mate- 
rials necessary  for  the  prompt  reestablishment  of 
industry ;  (c)  provisions  for  supplying  labor  to  peace 
industries,  and  machinery  for  the  adjustment  of 
labor  disputes ;  (d)  methods  for  the  promotion  and 
development  of  domestic  industries,  and  (e)  ques- 
tions of  industrial  research  and  of  educational  train- 
ing for  business. 

That  these  questions  require  thorough  study  be- 
fore the  inauguration  of  the  reconstruction  pro- 
gram hardly  needs  argument.  Such  a  large  part 
of  our  laboring  population  is  either  in  the  national 
service,  or  in  the  war  industries,  that  grave  dis- 
order would  result  from  the  adoption  of  the  old 
method  of  drift  in  settling  after-war  employment 
problems.  If  for  no  other  reason,  the  fact  that 
several  million  men  have  been  drafted  into  service 
makes  it  incumbent  upon  the  Government  to  pro- 


RECONSTRUCTION  FOR  UNITED  STATES    319 

vide  for  their  welfare  during  the  period  of  read- 
justment. But  industrial  and  social  conditions  are 
also  involved;  these  conditions  demand  some 
machinery  for  the  orderly  restoration  of  men  to 
peaceful  occupations.  It  is  undoubtedly  true  that 
many  of  the  vacated  places  will  be  waiting  for  the 
men  after  the  war,  —  provided  business  is  not  seri- 
ously disturbed  during  the  process  of  reconstruction. 
It  is  true,  also,  that  many  of  the  men  called  into 
service  under  the  recent  law  will  return  to  schools 
and  universities.  But  this  will  be  the  lot  of  only  a 
small  percentage  of  the  total.  The  great  majority 
of  the  men,  both  in  the  army  and  in  war  industries, 
will  require  the  assistance  of  some  employment  or- 
ganization to  enable  them  to  obtain  work.  It  may 
happen  that  the  revival  of  the  peace  industries  will 
be  so  rapid  that  they  can  absorb  returning  soldiers 
and  workers  in  war  industries ;  but  the  problem  will 
still  exist  of  bringing  men  and  jobs  together. 

It  will  be  the  peculiar  task  of  some  committee  to 
decide  upon  the  wisdom  of  making  large  appropri- 
ations to  establish  soldiers,  and  perhaps  workers  in 
war  industries,  upon  the  soil.  This  proposition  re- 
quires careful  study.  It  contains  the  possibility  of 
wasting  millions  of  dollars  in  fruitless  effort.  The 
plan  must  be  studied  in  connection  with  numerous 
problems  of  farm  management  such  as  the  economic 
size  of  the  farm,  methods  of  marketing,  accounting, 
purchase  of  supplies,  the  kinds  of  crops  to  raise, 
questions  of  financing  the  new  farmer.  An  impor- 
tant element  in  this  problem  is  the  matter  of  mak- 


S20        PROBLEMS  OF  RECONSTRUCTION 

ing  social  life  on  the  farm  attractive.  If  the  pro- 
spective soldier-farmer  has  not  been  brought  up  in 
the  country,  or  if  he  has  not  received  some  educa- 
tion in  an  agricultural  school,  he  has  before  him  a 
long  period  of  discouraging  apprenticeship,  with  the 
possibility  of  an  unfortunate  disillusionment,  — 
granted  all  the  while,  that  the  prospects  of  farming 
satisfy  his  present  ambitions.  It  is  a  safe  guess, 
however,  that  after  the  enlivening  experiences  of 
the  war  the  thoughts  of  the  discharged  soldier  will 
not  turn  toward  the  farm,  but  in  the  direction  of 
activity  of  some  kind  in  the  industrial  centers.  For 
many  enterprising  men,  the  prospects  in  industrial 
and  commercial  life  will  be  the  more  inviting.  Pos- 
sibly some  plan  of  business  education  under  govern- 
ment auspices  whereby  men  may  receive  instruction 
while  engaged  in  an  occupation  would  be  the  wiser 
solution  of  this  problem. 

Questions  relating  to  the  disposal  of  government 
materials  and  stores  require  careful  investigation. 
At  the  end  of  the  war  the  United  States  will  be  the 
owner  of  iron,  steel,  and  copper  in  various  manu- 
factured forms,  of  wagons,  trucks,  rolling  stock, 
railway  materials,  warehouses,  and  of  supplies  requi- 
sitioned for  war  purposes.  It  will  also  have  a 
financial  interest  in  port  facilities  and  shipping  both 
in  this  country  and  in  France.  These  properties 
represent  the  investment  of  many  millions  of  dol- 
lars. The  question  of  saving  or  losing  huge  sums  is 
involved  in  the  method  employed  in  disposing  of 
this  property.     It  must  be  inventoried,  catalogued, 


RECONSTRUCTION  FOR  UNITED  STATES    321 

stored,  and  some  policy  must  be  developed  for  its 
disposition.  This  is  the  task  of  another  committee. 
We  referred  above  to  problems  which  will  con- 
front industrial  managers  at  the  close  of  the  war. 
One  of  these  is  the  matter  of  "financial  facilities." 
It  is  by  no  means  clear  that  the  industries  of  this 
country  will  require  some  special  kind  of  support  in 
making  the  transformation  from  war  to  peace  pro- 
duction. If  assistance  is  needed,  there  is  still  the 
unsettled  question  of  the  form  this  assistance  should 
take.  This,  of  course,  is  not  a  matter  of  short  time 
loans,  —  of  discount  of  commercial  paper,  —  for  in 
this  field  our  facilities  are  already  adequate.  But 
it  is  a  question  of  finding  credit  for  capital  pur- 
poses, that  is,  for  the  erection  of  plants,  and  for 
the  purchase  of  machines  and  tools.  It  is  probably 
true  that  the  demands  upon  financing  of  this  kind 
will  be  enormous.  In  addition  to  the  needs  of  in- 
dustry, funds  will  be  required  for  building  oper- 
ations on  an  unusual  scale,  because  of  the  postpone- 
ment of  such  enterprises,  and  for  public  utilities 
which  have  done  their  share  of  conserving  during 
the  war  period.  With  reference  to  industries,  some 
companies  have  already  made  ample  provision  for 
the  prospective  requirements ;  others  are  strong 
enough  to  finance  themselves ;  but  it  is  possible 
that  some  enterprises  will  require  assistance. 
Whether  this  should  be  obtained  through  the  or- 
dinary channels,  or  through  some  government 
agency  is  a  matter  which  requires  serious  study.  It 
would  be  unfortunate  for  aid  to  be  offered  in  any 


322        PROBLEMS  OF  RECONSTRUCTION 

form  in  which  the  Government  became  in  effect  a 
sponsor,  or  a  partner,  in  the  enterprise. 

The  question  of  "financial  facilities"  is  closely  re- 
lated to  another  post-war  problem,  namely,  the 
supply  of  raw  and  finished  products.  When  it  is 
remembered  that  building  operations  have  been 
largely  suspended,  that  many  of  the  so-called  peace 
industries  are  working  only  on  part  capacity,  that 
the  conservation  plans  of  the  Government  have  re- 
duced the  supplies  of  many  finished  products,  and 
that  stocks  of  many  raw  materials  have  been  largely 
exhausted,  it  can  be  understood  that  one  of  the  first 
tasks  confronting  the  country  is  to  supply  these 
various  deficiencies.  Until  this  is  done,  industries 
will  not  be  ready  to  resume  normal  activities.  The 
demand  for  some  commodities  will  be  very  great. 
Possibly  the  supplies  of  materials  will  not  be  sufficient 
to  meet  the  immediate  needs  of  all  producers.  In 
that  event,  it  may  be  deemed  desirable  to  continue 
for  a  time  the  present  war  priority  arrangements  so 
that  the  most  important  industries  may  be  served 
first.  In  some  European  countries,  where  it  is  con- 
sidered highly  important  to  restore  foreign  trade  at 
once,  serious  attention  is  being  given  to  the  policy 
of  granting  preferences  to  those  industries  which 
provide  commodities  for  export.  Priority  arrange- 
ments are  also  in  prospect  for  the  limited  amount  of 
shipping  space.  In  short,  industries  are  to  be  ra- 
tioned in  their  receipt  of  raw  materials  from  abroad, 
in  their  use  of  domestic  supplies,  and  in  their  use  of 
available  tonnage.     With  the  United  States  these 


RECONSTRUCTION  FOR  UNITED  STATES    323 

are  not  serious  problems.  But  in  view  of  the  pos- 
sible demand  for  raw  materials  it  may  be  deemed 
necessary  to  give  a  preference  to  industries  which 
supply  the  most  important  commodities. 

Whether  such  a  policy  is  necessary  can  only  be 
determined  by  a  survey  of  plant  conditions  and  of 
the  present  supplies  of  raw  and  finished  products. 
This  task  will  fall  to  committees  representing 
groups  of  industries.  The  recommendations  for  a 
reconstruction  policy  covering  these  features  should 
originate  with  such  committees. 

Another  serious  problem  confronts  industrial 
managers.  Not  only  will  they  have  to  investigate 
conditions  affecting  the  future  supply  of  labor,  — 
a  matter  which  will  bring  them  to  some  extent  in 
contact  with  the  demobilization  policy  of  the  Gov- 
ernment, —  but  they  must  study  the  future  rela- 
tions between  employers  and  workmen.  An  English 
writer  has  stated  the  problem  as  applied  to  his 
country  as  follows  :  *'The  task  for  the  young  and 
energetic  employer  of  the  future  .  .  .  will  be  the 
reconstruction  to  a  certain  extent  of  the  relations 
between  employers  and  employed.  That  they  will 
be  different  in  form  from  the  conditions  existing 
before  the  war  I  very  much  doubt,  but  in  spirit 
they  will  have  to  be  very  different."  Elsewhere  he 
said:  "Labour  will  come  back  from  the  war  im- 
bued with  greater  energy,  with  a  keener  desire  for 
justice  and  with  a  certain  spiritual  element  in  its 
character  which  will  be  the  most  formidable  part  of 
the   problem   that    will   have   to    be   faced.     This 


324        PROBLEMS  OF  RECONSTRUCTION 

spiritual  element,  the  desire  to  create  a  world  based 
on  more  exact  notions  of  justice,  will  lend  a  violent 
character  to  the  movement  which  it  inspires.  There 
will  be  many  experiments  in  a  socialistic  direction, 
which  cannot,  in  the  nature  of  things,  be  carried 
successfully  beyond  a  very  little  way.  Their  failure 
will  not  alleviate  labour  unrest,  and  any  conviction 
on  the  part  of  Labour  members  and  workmen  that 
these  socialistic  efforts  have  failed  because  they  have 
not  been  given  a  fair  chance  will  open  the  door  to 
revolution.  To  prevent  this  is,  I  think,  the  great 
task  before  the  employer  of  the  future."  ^ 

The  outlook  for  the  United  States  is  not  as  se- 
rious as  for  England,  as  pictured  by  this  author, 
yet  the  problem  is  one  which  requires  study.  The 
old  relations  between  employers  and  men  have  been 
materially  changed  by  the  war  regulations.  New 
principles  of  adjustment  of  disputes  have  been  given 
wide  acceptance.  Even  if  employers  wished  to  re- 
establish the  old  order,  it  could  not  be  done  without 
a  clash.  Moreover,  even  now,  in  many  industries, 
industrial  relations  have  not  been  worked  out  in  a 
way  that  gives  satisfaction  either  to  employers  or  to 
men.  Soldiering,  labor  turnover,  lack  of  esprit  de 
corps,  and  unrest  are  among  the  greatest  causes  of 
inefficiency  in  business.  The  most  important  of  all 
the  management  problems  is  to  create  a  new  at- 
titude towards  work  which  will  encourage  laborers 
to  give  their  eager  support  to  their  managers.  But 
this  end  cannot  be  reached  until  some  solution  is 

^  Dibblee,  op.  cit.,  pp.  94,  99. 


RECONSTRUCTION  FOR  UNITED  STATES    325 

found  to  the  four  evils  named  above.  In  the  after- 
war  period,  when  all  the  resources  of  the  country 
should  be  devoted  to  the  prompt  and  orderly  rees- 
tablishment  of  business,  it  would  be  a  serious  handi- 
cap if  disagreements  were  to  arise.  This,  of  course, 
is  partly  a  question  of  wages  and  profits,  —  i.e.,  a 
distribution  problem,  —  but  it  is  also  partly  a  mat- 
ter of  the  attitude  of  management  towards  labor,  and 
the  reverse.  If  managers  must  educate  workmen  to 
their  point  of  view,  laborers  also  must  educate  man- 
agers to  their  way  of  seeing  industrial  relations. 
Much  more  than  mutual  understanding  is  required, 
for  such  understanding  must  be  based  on  a  knowledge 
both  by  employers  and  by  workmen  of  industrial 
conditions  and  of  the  action  of  economic  forces. 
The  task  of  learning  such  conditions,  and  the  oper- 
ation of  such  forces,  is  a  field  of  study  for  several 
other  reconstruction  committees.  One  part  of  their 
work  will  be  to  find  some  satisfactory  method  for 
bringing  employers  and  laborers  together  for  dis- 
cussion. Whether  we,  in  the  United  States,  should 
adopt  the  principles  of  the  Whitley  report,^  or 
whether  we  should  find  some  other  method  of  ad- 
justing grievances,  is  a  matter  for  these  reconstruc- 
tion committees  to  decide.  It  might  be  added  in 
this  connection  that  the  tendency  has  been  growing 
during  the  war  to  adjust  the  wages  question  on  the 
supposition  that  the  workman's  compensation  is 
principally  a  matter  of  distribution,  —  i.e.,  a  matter 
of  wages  and  profits.     The  relation  between  wages 

*  Cf.  supra,  p.  292. 


S26        PROBLEMS  OF  RECONSTRUCTION 

and  the  productivity  of  the  workmen  has  been 
largely  overlooked.  The  great  increase  in  costs, 
and  the  resulting  advances  in  prices,  are  partly  due 
to  this  fallacious  method  of  solving  wages  problems. 
It  is  not  our  contention  that  the  present  system  of 
distribution  satisfies  the  canons  of  justice,  but  that 
measures  for  increasing  wages  and  for  increasing 
the  yield  of  labor  and  capital  must  be  worked  out 
largely  as  parts  of  one  problem.  In  short,  in  our 
eagerness  to  solve  the  problems  of  distribution  we 
should  not  overlook  those  of  production. 

A  second  great  group  of  reconstruction  questions 
has  reference  to  the  relations  of  government  to  in- 
dustry. Some  of  the  leading  elements  in  this  group 
are  the  following  :  (a)  Methods  of  relaxing  war-time 
control;  (6)  formulation  of  a  government  policy 
with  reference  to  railroads,  telegraphs,  and  ocean 
shipping;  (c)  measures  for  the  protection  and  pro- 
motion of  foreign  trade ;  {d)  methods  of  dealing  with 
enemy  property,  and  the  future  policy  with  refer- 
ence to  foreign  investments  in  the  United  States ; 
(e)  the  relation  of  the  Government  to  domestic  in- 
dustry which  involves  the  future  attitude  of  the 
Government  towards  big  business;  (/)  the  formu- 
lation of  a  general  government  policy  covering  such 
issues  as  conservation  and  development  of  our 
natural  resources,  reclamation  of  swamp  and  arid 
lands,  improvement  of  rivers,  building  of  highways, 
the  construction  of  canals,  irrigation,  reforestation, 
the  development  of  water-power  projects,  educa- 
tional problems,  and  the  question  of  State  aid  and 


RECONSTRUCTION  FOR  UNITED  STATES    327 

leadership  in  scientific  and  industrial  research.  We 
may  discuss  some  of  these  problems  briefly. 

From  our  study  of  the  development  of  war  con- 
trol the  reader  is  now  familiar  with  the  war  organ- 
ization of  the  United  States  and  its  effects  upon  in- 
dustry. If  the  war  statutes  are  not  continued,  much 
of  this  control  will  end  automatically  shortly  after 
the  conclusion  of  peace.  But  the  question  is  raised 
whether  it  will  be  safe  to  release  this  pressure  at 
once,  in  view  of  the  prospective  uncertain  condi- 
tions. What  would  be  the  effect  on  the  supply  of 
foodstuffs,  and  upon  food  prices,  of  a  sudden  cessa- 
tion of  regulations  ?  Without  the  assistance  of  some 
institution  like  the  War  Industries  Board,  how  would 
industries  fare,  which  are  seeking  to  get  back  to  a 
peace  basis?  In  view  of  the  proposals  abroad  to 
inaugurate  systems  collective  of  buying  and  selling, 
would  it  be  safe  to  leave  American  industries  un- 
protected, or  is  a  body,  similar  to  the  War  Trade 
Board,  needed  to  defend  our  trade?  If  European 
countries  continue  to  regulate  their  commerce  by 
war-time  methods,  would  not  our  traders  and  man- 
ufacturers suffer  in  the  absence  of  some  machinery 
for  regulation  ?  These  questions  must  be  answered 
by  some  reconstruction  committee. 

With  regard  to  railroads,  it  was  constantly  urged 
that  the  system  of  regulation  existing  before  the 
war  was  bringing  many  roads  to  grief;  now,  many 
persons  insist  that  the  railroads  must  be  returned  to 
their  owners.  But  if  they  are  returned,  some  form 
of  government  regulation  will  be   required.     What 


328        PROBLEMS  OF  RECONSTRUCTION 

kind  of  regulation  will  best  suit  the  exigencies  of  the 
case? 

Many  knotty  problems  are  presented  in  the  study 
of  the  future  shipping  situation.  What  disposition 
is  to  be  made  of  the  great  ocean  marine  now  build- 
ing under  the  auspices  of  the  Shipping  Board  ? 
Should  these  vessels  be  owned  and  operated  by  the 
United  States?  If  so,  what  effect  will  this  policy 
have  on  the  relations  of  our  Government  to  other 
Governments,  and  to  foreign  private  owned  shipping 
companies  ?  How  would  such  ownership  affect  the 
development  of  American  commerce  ?  If  these  ves- 
sels are  sold  to  private  companies  will  it  be  possible 
to  operate  them  at  a  profit  under  the  present  ship- 
ping laws  of  the  United  States  ?  Suppose  they  can- 
not be  operated  at  a  profit,  should  we  permit  them 
to  pass  to  foreign  ownership,  or  should  the  Govern- 
ment come  to  the  aid  of  the  shipping  companies  by 
granting  subsidies  or  assistance  of  some  kind  ?  The 
future  of  our  merchant  marine  is  involved  in  the 
answer  to  these  questions.  We  should  know  the 
comparative  costs  of  shipbuilding  in  the  United 
States  and  in  foreign  countries  and  the  causes  for 
the  differences ;  we  should  know  also  the  relative 
advantages  and  disadvantages  of  operating  vessels 
under  the  American  flag,  together  with  the  reasons 
involved.  These  questions  can  only  be  answered  by 
a  close  and  unbiased  study  of  the  facts,  and  recom- 
mendations are  worth  very  little  unless  based  on 
such  a  study. 

The  development  of  post-war  commerce  presents 


RECONSTRUCTION  FOR  UNITED  STATES    329 

other  serious  problems.  European  countries  are 
contemplating  great  changes  in  their  foreign  trade 
policy.  We  must  study  their  measures,  estimate 
the  effects  on  our  industries,  and  be  prepared  with 
a  plan  of  our  own.  A  feature  in  the  prospective 
foreign  trade  relations  which  is  largely  escaping  at- 
tention is  the  shift  in  the  United  States  from  a 
debtor  to  a  creditor  position.  Many  of  the  ele- 
ments in  the  new  situation  will  tend  to  promote 
the  import  rather  than  the  export  trade.  They  will 
bring  foreign  producers  more  and  more  into  com- 
petition with  home  producers  in  our  home  markets. 
We  are  now  receiving  large  interest  payments  on 
our  foreign  loans;  the  loans  themselves  will  be 
paid  back  sometime  in  the  future ;  we  will  presently 
have  a  merchant  marine  to  carry  our  own  and  for- 
eign trade  with  the  result  that  in  place  of  making 
payments  abroad  to  cover  freight  bills  we  will  be 
receiving  large  payments.  That  we  are  now  in  a 
position  to  finance  much  of  our  foreign  commerce 
will  somewhat  diminish  our  obligations  to  foreign 
countries.  How  will  these  various  obligations  to  the 
United  States  be  discharged?  What  form  will  the 
payments  take,  and  what  will  be  the  effect  on  for- 
eign and  domestic  industry.'*  Payment  in  gold  is 
out  of  the  question.  No  doubt  foreign  countries 
would  be  glad  to  discharge  their  debts  by  export- 
ing commodities.  This  would  provide  a  great  out- 
let for  their  manufactures,  but  it  might  have  a  se- 
rious effect  on  our  own  industries  which  had  to  meet 
the    foreign    competition.     We    might    adopt    the 


330        PROBLEMS  OF  RECONSTRUCTION 

policy  of  encouraging  the  investment  of  our  bal- 
ances in  other  countries,  but  this  would  hardly  be  a 
satisfactory  solution  in  view  of  the  fact  that  we  will 
need  all  our  credit  resources  for  the  restoration  of 
our  own  industries.  A  number  of  other  solutions 
could  be  found,  but  in  every  case,  they  militate 
against  the  interest  either  of  the  United  States  or 
foreign  countries.  The  latter  would  object  to  any 
form  of  debt  settlement  which  impeded  the  rees- 
tablishment  of  their  commerce.  We  have  raised 
these  questions  to  illustrate  the  fact  that  it  is  not  to 
our  advantage  to  allow  our  obligations  to  drift  into 
a  settlement,  for  that  method  would  work  to  our 
disadvantage.  As  with  all  other  problems,  our 
future  policy  should  be  based  on  a  careful  study  of 
conditions. 

A  third  great  group  of  reconstruction  problems  re- 
fers to  government  finance.  Ultimately,  the  huge 
war  debt  of  the  United  States  will  be  paid  largely 
with  the  proceeds  of  taxation,  but  we  can  reduce 
somewhat  the  burdens  of  future  taxes  by  economy. 
Hence  our  investigations  should  have  two  purposes : 
(a)  to  find  the  ways  and  means  of  effecting  econ- 
omies, and  (6)  to  devise  a  system  of  raising  revenue 
which  suits  our  industrial  and  financial  conditions. 
This  latter  investigation  will  lead  to  the  study  of 
various  forms  of  taxation,  involving,  of  course,  their 
effectiveness  as  methods  of  producing  revenue,  and 
their  influence  on  industry.  The  investigation  will 
also  lead  to  a  study  of  our  future  tariff  policy ;  pos- 
sibly it  will  comprehend  the  question  of  administer- 


RECONSTRUCTION  FOR  UNITED  STATES    331 

ing  our  natural  resources  so  that  they  may  be  made  a 
source  of  considerable  revenue. 

No  doubt  many  persons  already  have  fixed  opin- 
ions as  to  how  these  questions,  and  many  others  we 
might  have  presented  in  our  outline,  should  be 
answered.  We  must  beware  of  ready-made  solu- 
tions. The  answers  are  not  at  hand  because  we  do 
not  know  the  facts  and  conditions  which  would  nat- 
urally affect  our  conclusions.  If  the  solutions  were 
known,  reconstruction  committees  would  not  be 
necessary.  The  function  of  these  committees  is  to 
study  facts  and  learn  industrial  conditions  which  are 
to  serve  as  a  basis  for  the  reconstruction  program. 
Economic  reconstruction  is  one  of  the  greatest  prob- 
lems we  have  ever  been  called  on  to  solve.  It 
is  a  PROBLEM  which  should  be  worked  out  like 
those  with  which  engineers  and  school  men  are 
familiar,  —  not  by  the  expression  of  opinions,  but 
by  toilsome  and  unbiased  study,  by  assembling  and 
comparing  data,  and  by  drawing  conclusions  from 
investigations.  This  is  the  only  method  by  which 
worthy  results  may  be  obtained.  A  program,  which 
is  the  product  of  this  method,  may  be  accepted  with 
confidence.  No  one  would  have  any  faith  in  it  if  it 
were  presented  after  only  hasty  and  superficial  in- 
quiry. It  is  understood,  of  course,  that  the  ulti- 
mate aim  is  not  the  promotion  of  this  or  of  that 
favored  interest,  but  the  ultimate  economic  welfare 
of  all  interests,  —  the  promotion  of  industrial  prog- 
ress with  all  that  implies.  The  task  is  a  great 
one,  but  its  very  magnitude  should  provide  the 
incentive  for  thorough  and  scientific  work. 


INDEX 


Agricultural  appropriations,  35. 
Agriculture, 

Department    of,    purchases    ni- 
trates, 241. 

Department  of,  war  work,  35. 
Agricultural    implements,     regula- 
tion of,  41. 
Allies'  Economic  Pact,  253  ff. 
American  Federation  of  Labor, 

Biiffalo  meeting,  110. 
American    Iron    and    Steel    Insti- 
tute, 150. 
Arbitration, 

England.  204. 

France,  208. 

Shipbuilding  industry,  118  £f. 
Australia, 

Foreign  trade  control,  182. 
Auxiliary  Service  Act   (Germany), 
206. 

Baker,  Newton  D.; 

Repudiates  coal  agreement,  81. 
Bakery  products. 

Regulation  of,  44. 
Bank  consolidations, 

Great  Britain,  232. 
Belgium, 

Foreign  trade  control,  242. 
Board  of  Conciliation, 

Coal  industry,  86. 
Boots  and  shoes. 

Control  of,  Italy,  189. 
British  dominions. 

Foreign  trade  control,  182. 
British  Labor  Party, 

Program  of,  215. 
British    War    Trade    Department, 
140. 


CanadaJ 

Foreign  trade  control,  182. 
Capital  issues. 

Controlled,  156  flf. 

Control  of,  England,  11. 

English  plan,  159. 

Hamlin,  Chas.  S.,  Policy  of,  163. 
Capital  Issues  Committee, 

Work  of,  25. 
Carleton,  Newcomb, 

Statement  of  the  Western  Union 
case,  129. 
Chamber  of  Commerce  of  the  U.  S., 

Work  of,  230. 
Clay  products,  99. 
Coal, 

Agreement  repudiated  by  Baker^ 
81. 

Board  of  Conciliation,  86. 

Competitive  bidding  for  labor,  92. 

Conservation  measures,   76,   92, 
96. 

Difficulties  of  administration,  74. 

Household  consumers  regiilated, 
101. 

Labor  control,  91. 

Labor  questions,  88. 

Penalty  clause  in,  90. 

Prices  fixed,  82. 

Priority  arrangements',  100  ff. 

Profit  margins  fixed,  86. 

Regulation  of,  72. 

Trade  practices  regulated,  87. 

Traders  defined,  83. 

Wages  in  coal  industry,  85. 

Zone  system,  94. 

Cf .  Fuel  control. 
Coal  producers. 

Plan  of  control,  80  ff. 


333 


S34 


INDEX 


Coal  Shippers'  Tenninal  Pool;  92. 
Coffee,  66. 
Cold  storage, 

Regulation  of,  47. 
Commercial  policy, 

Reconstruction  of,  328  ff. 
Conservation  measures,  68,  176. 
Copper, 

Price  policy,  174. 
Cotton  industry. 

Control  of,  Italy,  188. 

Control  of,  Spain,  185. 
Council  of  National  Defense," 

Appoints    Hoover    chairman    of 
committee  on  food  supply,  36. 

Appoints      Labor      Adjustment 
Commission,  114. 

Cooperation  with  States,  26. 

Created,  23. 

Labor  Committees  of,  113. 

Labor  program  of,  112. 

On  need  of  cooperation,  231. 

Regulation  of  coal  industry,  80. 

Work  of,  23. 

Cf .  State  Coimcils  of  Defense. 

Deeds,  E.  A.; 

Inquiry  on  capital  issues,  157. 
Defense  of  the  Realm  Act,  203. 
Demobilization, 

England,  281. 
Denmark, 

Trade  controlled,  139. 
Dutch  Export  Company, 

Formed,  156. 

Economic  penetration,  264  ff. 
Emergency  Fleet  Corporation,  173. 
Employment  service,  133  ff. 
Engineering  trades. 

Reconstruction  policy,  284. 
England,  cf .  Great  Britain. 
Espionage  Act, 

Approved,  141. 

Provisions,  141,  142. 
Exchange,  cf .  Foreign  exchange. 
Exports  Administrative  Board, 

Work  of,  144. 
Export  control. 

President  Wilson's  idea,  7. 


Exports  Council^ 
Work  of,  145. 

Fair  price,' 

Wheat,  50. 
Fair  price  lists,  49. 
Federal  Reserve  Board, 

Regulation  of  capital  issues,  158. 

Relation  to  War  Finance  Corpo- 
ration, 161. 
Federal  Trade  Commission, 

Aids  in  food  control,  43. 

Cost  investigations,  174. 

Investigates  bakery  products,  45. 

Investigates  coal  prices,  73,  82. 

On  the  railroad  situation,  169. 

On  regulation  of  coal  prices,  80. 

Report  on  coal  industry,  75. 

Report  of  meat  packing  indus- 
try, 64  ff. 
Federated  Malay  States,  183. 
Federation  of  British  Industries,  237. 
Feed, 

Regulation  of,  40,  48. 
Fertilizers,  41. 
Finance, 

Relation  to  reconstruction,    12, 
330. 
Flour,  48. 
Food  Act, 

Provisions  of,  23  ff. 

Provisions  for  volunteer  service, 
34. 

Significance  of,  34. 

Termination  of,  5. 
Food  conservation. 

Early  measures,  37. 
Food  control, 

Bakery  products,  44. 

Bill  introduced,  30. 

Bill  passed,  30. 

Bills  in  Congress,  29. 

Cold  storage,  47. 

Conservation,  37,  68. 

Early  ideas  about,  27. 

Features  of,  38. 

Future  of,  5. 

Germany,  195  ff. 

Grain  corporation,  52. 

Great  Britain,  192  ff. 


INDEX 


S35 


Food  control,  continued, 
Hoover's  plan,  27. 
Hoover's  reasons  for,  10, 
Information  service,  42, 
Italy,  185,  190. 
President  Wilson's  plan,  6,  28, 
Price-fixing  policy,  45. 
Regulation  of  eating  places,  40. 
Regulation  of  retailers,  39. 
Regulation  of  trade  practices,  44, 

45,  46. 
Spain,  184. 

Suggested  list  of  articles,  31, 
Uruguay,  183. 
Voluntary  measures,  38,  67, 
Wheat,  49. 
Work    of     the    Federal     Trade 

Commission,  43. 
Cf.    Hoover,    Licensing    system, 

Wilson. 
Food  pledge  week,  70. 
Foreign  exchange, 

Control  of,  152,  188, 
Foreign  trade  control, 
British  dominions,  182. 
British  plan  to  continue,  217, 
British  policy,  208  ff. 
Certain  commodities,  180  ff. 
Effect  on  neutrals,  143. 
Espionage  Act,  141. 
Exports,  142. 
Foreign  coiintries,  Ch.  6. 
France,  211. 
German  plans,  239. 
Germany,  211. 
Holland,  154. 
Imports,  142. 
Italy,  187. 

Licensing  system,  153. 
Methods  of,  139,  144  ff. 
Netherlands  Overseas  Trust,  140. 
Neutrals,  180. 
Reasons  for,  179. 
South  American  countries,  156. 
Switzerland,  154. 
Trading   with   the   Enemy   Act, 

142. 
Cf.    War    Service     Committees, 

War  Trade  Board,  and  names 

of  the  countries. 


Foreign  trade  policy, 

British  empire,  after  war,  262  ff. 

Effect  of  war  on.  241,  243,  251  ff, 

English,  after  war,  234,  235,  288. 
Foreign  trade  relations. 

Interdependence  of,  299  ff. 
France, 

Foreign  trade  control,  211. 

Labor  policy,  207, 
Frankfurter,  Felix. 

Statement  of  policy,  129, 
Fuel  administration,  Ch.  3. 
Fuel  control, 

Inaugurated,  79. 

Organization,  77, 

Problems  of,  99. 

Provisions  of  Lever  Act,  72, 

Cf.  Coal,  Garfield, 

Garfield,  Harry  A, 

Appointed  Fuel     Administrator, 
79. 

Fixes  profit  margins,  84,  86, 

Fuel  policy,  77  ff.,  79,  84,  86, 
General  Electric  Company, 

Before  the  War  Labor  Board,  128. 
Germany, 

Control  of  raw  materials.  199. 

Demobilization  plans,  294, 

Food  control,  195. 

Foreign  trade  control,  211, 

Future  of  control,  14. 

Industrial  combinations,  237, 

Labor  policy,  206. 

Methods  of  economic  expansion, 
264. 

Methods    in    Italy    and    Spain, 
264,  265. 

Reconstruction  policy,  295. 

Trade  stopped,  144. 
Gompers,  Samuel, 

Urges  protection  of  labor  stand- 
ard, 109. 
Grain  corporation, 

Created,  52. 
Gray,  Howard  L., 

On  British  war  control,  13, 
Great  Britain, 

After-war  problems,  10  ff. 

Bank  consolidations,  233. 


INDEX 


Great  Britain,  continued, 
Control  of  industries,  199. 
Food  control,  192  ff. 
Foreign  trade  policy,  180. 
Future  commercial  policy,  288. 
Future  investment  policy,  286. 
Industrial  combinations  in,  232, 

234. 
Key  industries,  287. 
Labor  policy,  200  ff. 
Labor  reconstruction  policy,  290. 
Methods  of  trade  control,  140. 
Plans  for  imperial  union,  262  ff. 
War  control,  210  ff. 

Hamlin,  Chas.  S.', 

Capital  issues  policy,  163. 
Harding,  W.  P.  C, 

Reasons   for    control    of    capital 
issues,  167. 
Holland, 

Trade  control,  139,  154. 
Hoover,  Herbert, 

Appointed    chairman   committee 

on  food  supply,  36. 
Appointed   Food   Administrator, 

38. 
Arguments  for  food  control,  27, 

218. 
Methods   of  obtaining  informa- 
tion, 42. 
Need  of  food  control,  9. 
Plans  for  food  control,  36  ff. 
Statement  about  price  fixing,  45. 
Cf.  Food  control. 

Immigration,  106. 

Imperial  War  Food  Bureau,  197. 

Imports, 

Control  of,  142. 
India, 

Foreign  trade  control,  182. 
Industrial  combination. 

Effect  of  war  on,  229. 

English  attitude  towards,  232. 

Germany,  237. 
Industrial  organization. 

Effect  of  war  on,  239  ff. 
Industrial  unrest. 

Great  Britain,  203. 


Interstate  Commerce  Commission, 

On  the  railroad  situation,  168. 
Investments, 

Future  British  policy,  286. 
Iron  and  steel. 

Industrial  combination,  England, 
236. 

Price  policy,  174. 

Priority  policy,  175. 
Italy, 

Control  of  boots  and  shoes,  189. 

Control  of  cottons,  188. 

Control  of  foreign  exchange,  IBS- 
Control  of  sugar,  187. 

Food  control,  185,  190. 

German  dominance  in,  264. 

Import  control,  187. 

Tonnage  problems,  187. 

War  measures,  185  ff. 

Japan, 

Effect  of  war  on,  3,  247  £f. 

Key  industries, 
British  policy,  287. 

Labor, 

Affected  by  war,  215,  226. 
Allocation  of,  England,  206. 
British  reconstruction  policy,  289. 
Comprehensive  plan  of  control, 

121  ff. 
Demands  of,  107. 
Distribution  of,  106,  135 
Early  war  policy,  113. 
Employment  service,  133  ff. 
English  policy,  200  ff. 
French  policy,  207. 
German  policy,  206. 
In  coal  industry,  88. 
Joint  representation  demanded, 

110. 
Labor  control,  91. 
Longshoremen's  strike,  116. 
McAdoo's  letter  to  strikers,  104. 
McAdoo's    railway    labor    plan, 

119. 
Measures  to  conserve,  25. 
Mediation  commission,  108. 
Mediation  and  conciliation,  126. 


INDEX 


337 


Labor,  continued, 

Program  of  British  Labor  Party, 
215. 

Railway  Wage  Commission,  119, 
120. 

Reconstruction  policy,  323  ff. 

Shipbuilding  Labor   Adjustment 
Board,  116. 

Shortage  of,  106. 

Unrest,  107. 

War  Labor  Board,  123. 

War   Labor   Conference   Board, 
123. 

Whitley  plan,  291. 

Women  in  industry,  132. 

Cf.  Wages ;   Wilson,  Wm.  B. 
Labor  Adjustment  Commission,  114. 
Labor  Administration,  Ch.  4. 
Labor  control, 

Difficulties  of,  103  ff. 

Policy,  105. 
Labor  Policies  Board,  4. 
Labor  Unions, 

War  policy  of,  108. 
Leather, 

Price  policy,  174. 

Trade  controlled,  140. 
Lever  Act,  cf .  Food  Act. 
Licensing  system,  42,  59,  69. 

AppUed    to    agricultural    imple- 
ments, 41. 

Applied  to  food  products,  38. 

Applied   to   foreign    trade,    147, 
163. 

Applied  to  raw  materials,  153. 
Longshoremen, 

Strike  of,  116. 

McAdoo,  Wm.  C, 

Admonishes    strikers     at     Alex- 
andria, 104. 

Appointed    Director-General    of 
railroads,  170. 

Capital  issues  policy,  157  ff. 

Explains  control   of   foreign  ex- 
change, 152. 

Railway  labor  plan,  119. 

Railway  policy,  171  ff. 

Remarks  on  War  Finance  Cor- 
poration, 166. 
Z 


Meat; 

Conservation  of,  68,  70. 

Regulation  of,  69. 

Cf.  Packers. 
Meatless  days,  68. 
Mediation  and  conciliation,  125. 
Mediation  Commission,  108. 
Merchant  marine,  300. 
Ministry  of    Reconstruction   (Eng- 

Ush),  275  ff. 
Montague,  Representative, 

Proposal  to  limit  power  of  Presi- 
dent, 31. 
Munitions  of  War  Acts,  202. 

National      Industrial    Conference 
Board, 
Report,  112. 
National  War  Labor  Board, 
Work  of,  123. 

Cf.    Labor,    Taft,    War    Labor 
Board. 
Netherlands    Import    and    Export 

Company,  155. 
Netherlands  Overseas  Trust,   140, 

154,  180. 
New  Zealand, 

Foreign  trade  control,  182. 
Nonferrous  Metal  Act,  251,  261. 
Norway, 

Foreign  trade  control,  181. 

Overman,  Senator, 

Plan  for  reconstruction,  312. 
Owen,  Senator, 

Plan  for  reconstruction,  307. 

Urges  Joint  Congressional  Com- 
mittee, 31. 

Packers, 

Policy  towards,  61  ff. 

Regulation  of,  59. 
Paris  Economic  Pact,  263,  256. 
Penalty  clause,  90. 
Price  fixing. 

Just  prices,  46. 
Price   pohcy,   45,    75,   79,   82,   88, 

174  ff. 
Price  regulation, 

Italy,  185. 


338 


INDEX 


Priority, 

Coal,  100. 

Policy  of,  175,  220. 
Profiteering,  66,  76. 
Profits, 

Coal' industry,  83,  84. 

Packers,  60. 
'      Regulation  of,  45,  47. 

Railroads, 

Administration  policy,  171  ff. 

Diffictilties  of,  167  ff. 

Federal  control  inaugurated,  169. 

Labor  policy,  119,  121. 

Railroad  War  Labor  Board,  167. 

Reconstruction  policy,  326,  327. 

Spain,  184. 
Railroad  Control  Act,  170,  171. 
Railroad  Wage    Commission,    119, 

120,  121. 
Railway  Board  of  Adjustment,  120. 
Rationing, 

English  industries,  209. 

Spain,  185. 
Reconstruction, 

A  world  problem,  16,  299  ff. 

Attitude  of  British  Labor  Party, 
17. 

British  idea,  10. 

Commission  plan  of,  312  ff. 

Committee  plan  of,  328  ff. 

Demobilization,  319. 

Engineering  trades,  England,  11. 

Financial  facilities,  321. 

Foreign  countries,  303. 

Government  finance,  330. 

In  Belgium,  269. 

In  England,  10,  11,  13,  269,  274, 
286,  287. 

In  Germany,  269,  295  ff. 

In  Holland,  273. 

In  Italy,  270. 

In  Japan,  280. 

In  Spain,  271. 

Labor  policies,  289,  323  fJ. 

Methods  proposed  in  the  U.  S., 
307  ff. 

Ministry  of  Reconstruction,  Eng- 
land, 276  ff. 

Need  of,  Ch.  1,  305  ff. 


Organization  of,  England,  276  ff. 

Outline  of  work,  United  States, 
317,  318. 

Overman  plan,  312. 

Owen  plan,  307  ff. 

Plan  for  the  United  States,  Ch.  9. 

Principles    to    be    followed,    16, 
304  ff.,331. 

Problems  of,  16,  16,  297  ff. 

Proposed    work   of   commission, 
314  ff. 

Related    to   international   inter- 
dependence, 300  ff. 

Relation  of  Government  to  in- 
dustry, 326. 

Shipping  problem,  328. 

Supply  of  raw  materials,  322. 

War  Service  committees,  315, 

Weeks  plan,  310. 
Regulation,  of.  various  titles. 
Results  of  the  war. 

Collective  buying,  241. 

In  Germany,  238  ff. 

In  Italy,  245. 

On  backward  countries,  244. 

On  British  imperial  vmion,  262  ff. 

On  foreign  trade  policy,  241,  243, 
261  ff. 

On  foreign  trade  relations,  214. 

On  industrial  combinations,  228, 
232,  237. 

On  industrial  organization,  218. 

On  Japanese  industry,  247  ff. 

On  labor  policies,  215,  226,  226. 

On  marketing  conditions,  218. 

On  relation  of  Government  to  in- 
dustry, 213,  214.  t , 

Stimulates    combination    move- 
ment, 242. 
Revolving  fund,  35. 
Rubber, 

Trade  controlled,  140,  151. 
Rubber  association,  149. 
J 

Shipbuilding  industry,  • 

Cf.  Labor,  Wages. 

Policy  in,  172. 
Shipbuilding     Labor     Adjustment 
Board,  116. 


INDEX 


339 


Shipping  Board, 

Policy  of,  172,  173. 
Siam, 

Foreign  trade  control,  183. 
Snow,  Chauncey  Depew, 

Quoted,  238. 
South  Africa, 

After- war  plans,  261. 

Foreign  trade  control,  182. 
South  America, 

Control  of  trade,  156, 
Spain, 

Control  of  cotton  industry,  185. 

Food  control  in,  184. 

German  methods  in,  265. 

Railway  control,  184. 

Rationing  system  in,  185. 

Trade  controlled,  139. 
Standard  of  living. 

Protection  of,  109. 
Standardization, 

Boots  and  shoes,  Italy,  190. 

Certain  products,  176. 
Stanley,  Sir  Albert, 

On  British  reconstruction,  10,  11. 
State  Councils  of  Defense, 

Organized,  26. 
Sugar, 

Control  in  Italy,  187. 

Conservation  measures,  57. 

International  Sugar  Committee, 
54. 

Methods  of  control,  38. 

Regulation  of,  53. 
Sugar  Administrator,  59. 
Sugar  Equalization  Board,  55. 
Sweden, 

Foreign  trade  control,  181. 
Switzerland, 

Foreign  trade  control,  154. 

German  domination  in,  265. 

Taft,  William  H., 

Appointed  to  War  Labor  Board, 
126. 
Technical  Research,  272. 
Telegraphs, 

Taken  over,  172, 
Thomas,  James, 

Speech  at  Labor  Conference,  109. 


Tin, 

Control  of,  150. 
Trade,  of.  Foreign  trade  control. 
Trade  practices, 

Regulation  of,  44,  46,  47,  67. 
Trading  with  the  Enemy  Act,  142. 

Uruguay, 

Foreign  trade  control,  183. 

Vienna  Chamber  of  Commerce, 

Resolution,  253. 
Voluntary  measures,  41,  67,  77. 

Wages, 

Coal  industry,  85. 

Equalization  of,  115. 

In  railway  business,  119,  121. 

Railroad  Wage  Commission,  120. 

Shipbuilding  industry,  118. 

Standardization  of,  118,  131. 

Cf.  Labor. 
Walsh,  Frank  P., 

Appointed  to  War  Labor  Board, 
126. 

Estimate    of    the    War    Labor 
Board,  126. 
War, 

Results  of,  Ch.  7,  pp.  2,  4,  13. 
War  control, 

England,  139, 

Food  products,  Ch.  2, 

Fuel,  Ch.  3, 

In  foreign  countries,  Ch.  6. 

Labor,  Ch.  3. 

Termination  of,  5,  6. 

Cf.  Capital  issues,  Foreign  trade 
control,  Imports. 
War  Finance  Corporation, 

Act  approved,  161. 

Criticism  of,  164. 

Loans  to  producers  of  livestock, 
167. 

Work  of,  25. 
War  Grain  Corporation,  Germany, 

238. 
War  Industries  Board, 

Coal  priorities,  100. 

Created,  24. 

Priority  policy,  132,  175. 


340 


INDEX 


War  Industries  Board,  continued. 

Relation  to  new  investments,  160. 

Results  of  policy  of,  221. 
War  Labor  Board, 

Creation  urged,  123. 

General  Electric  case,  128. 

PoUcies  of,  123  ff.,  131. 

Taft,  William  H.,  appointed  to, 
123. 

Umpires  appointed,  126. 

Walsh,  Frank  P.,  appointed  to, 
126. 

Western  Union  case,  127,  129. 
War  Labor  Conference  Board,  123. 
War  Labor  Policies  Board, 

Appointed,  123. 

Work  of,  129. 
War  laws  of  the  United  States,  21. 
War  measures, 

Permanence  of,  Ch.  1,  p.  217. 
War  Service  Committees, 

Work  of,  149  ff . 

Work  in  reconstruction,  315. 
War  Trade  Board, 

Established,  145. 

Policy  of,  144. 

Reasons  for  control,  147. 
Waynesboro,  Penn., 

Labor  dispute  settled,  128. 
Weeks,  Senator, 

Plan  of  reconstruction,  310. 
Western    Union    Telegraph    Com- 
pany, 

Before   the   War   Labor   Board, 
127,  129. 
Wheat, 

Congressional  attitude,  61. 

Conservation,  69. 


Method  of  control,  38.  ,< 

Price  guaranteed,  33,  51. 
Price  policy,  49. 

Provisions  for,  in  Lever  Act,  33. 
Rise  in  prices,  27. 
Wilson,  William  B., 

Labor  Administrator,  106. 
Labor  policies  of,  105  ff. 
Wilson,  Woodrow, 

Attitude  towards  control,  6,  7. 
Attitude  towards  labor,  110. 
Objects  to  limitation  of  powers, 

31. 
Plan  for  food  control,  28  ff. 
Proclamations, 

Coal,  82. 

Food,  40. 

Foreign  trade  control,  146. 

Railroads,  169. 

Sugar,  63. 

Wheat,  50,  51. 
Reasons    for    railroad     control  j 

170. 
Regards  war  laws  as  emergen- 
cies, 6. 
War    labor    program    approved, 

122. 
War  policy  of,  177. 
Women, 

Attitude  of  Labor  Policies  Boards 

132. 
Wool, 

Price  policy,  174. 

Trade  controlled,  140. '    . 


Zone  system. 

Applied  to  coal,  94, 


Printed  in  the  United  States  of  Americ*. 


UNIVERSITY  OF  CALIFORNIA  AT  UOS  ANGELES 
THE  UNIVERSITY  LIBRARY 

This  book  is  DUE  on  the  last  date  stamped  below 


m  1 5  19^^ 

SEP  SO  1943 
DEC «      1953 

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FEB     8  1980 


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WAR  17198? 


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MAY  2  3  m 


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